JPMorgan 'tech company' claim nixed by reality?

Published Wed, Feb 24 20161:26 PM ESTUpdated Wed, Feb 24 20161:40 PM EST

Breakingviews

Antony Currie

JPMorgan is a technology company. That's what Chief Financial Officer Marianne Lake told investors on Tuesday. In a broad sense, she's right. Behind its $2.4 trillion balance sheet, JPMorgan employs thousands of developers and uses technology better than many rivals. It nevertheless comes with the risks and returns of finance. The company's tech nous is perhaps most obviously on display in the retail operations, run by Gordon Smith. Much of the recent boom in financial technology, or fintech, has focused on payments. Mobile apps and ATMs now can handle 90 percent of transactions traditionally done in a Chase branch, for example. That's more convenient for clients and has helped to halve the annual cost of servicing them. Customers also sent $20 billion to each other electronically last year, more than twice as much as was managed by PayPal -owned Venmo. And JPMorgan has built its own payments network, Chase Pay. More from Breakingviews : Time plus Yahoo conjures ghoulish AOL past The investment bank's technology push isn't as obvious, but boss Daniel Pinto says it accounts for a sizable slug of JPMorgan's $9 billion tech budget. He's spending it on everything from high-performance computing to machine learning to digital ledgers like Blockchain. There's more to be done, too. Smith says call-center costs per checking account decreased by a fifth between 2012 and 2015. Digital communications firm Xura reckons its products could cut the average industry cost by two-thirds. For all the progress and promise, though, it has yet to show up noticeably in profitability. In part that's because higher regulatory costs and low interest rates have taken their toll. The risk that the Federal Reserve might not raise interest rates was a big reason JPMorgan on Tuesday delayed its 15 percent return on tangible equity target by a year to 2018. Read More The Kashkari trade: Time to buy bank stocks? That fear already has punished shares of JPMorgan and its peers. The bank led by Jamie Dimon also just added $500 million to reserves to cover rising losses in oil and gas companies. That sum is manageable, but JPMorgan lost another 4 percent of its market value as news trickled out of the investor gathering. While it may prefer to align itself with the entrepreneurial and fast-growing world of Silicon Valley, JPMorgan for now is a bank. For more independent commentary and analysisfrom Reuters Breakingviews, visit breakingviews.com

Timothy A. Clary | AFP | Getty Images

JPMorgan is a technology company. That's what Chief Financial Officer Marianne Lake told investors on Tuesday.

In a broad sense, she's right.

Behind its $2.4 trillion balance sheet, JPMorgan employs thousands of developers and uses technology better than many rivals. It nevertheless comes with the risks and returns of finance.