Jamie Dimon has a message for his employees and investors: When the time comes, J.P. Morgan Chase will rein in loan growth at the nation's biggest bank.
Analysts peppered Dimon, 62, and his chief financial officer Tuesday with questions about loans amid concerns that the U.S. is nearing the end of a long economic expansion. When a recession finally takes hold, defaults will rise as consumers and corporations struggle to repay debts, and lenders that aggressively took on risk will be left with ballooning losses.
"We tell our management that we have no problems seeing loan books shrink," Dimon said in the earnings conference call. "Remember, Warren Buffett used to say in the insurance business, and sometimes this is true in the loan business, [there are times] when you're better off having the sales force go play golf than make new loans. We are not going to be stupid."
The questions come after J.P. Morgan posted quarterly profit below analysts' expectations for the first time in 15 quarters as turbulent markets late last year affected results across operations. The bank surprised analysts by setting aside $1.55 billion for credit losses, $250 million more than the average estimate, as it prepared for hits on credit card debt and commercial and industrial loans.
Still, when the next analyst, Betsy Graseck of Morgan Stanley, asked Dimon if his salespeople were "playing golf all day yet," Dimon responded with a sharp "No."
Credit from mortgage to middle-market lending has still been mostly "pristine," apart from a few areas where competition has become too heated in the industry, including auto loans, subprime credit cards and leveraged loans, Dimon said.
CFO Marianne Lake specified that in areas such as mortgage lending, auto loans and commercial real estate, the bank has refused to chase growth, particularly where clients don't have multiple relationships with the New York-based bank.
"Where businesses are notably a little bit less relationship driven, think about loan-only relationships, commercial term lending, real estate banking, mortgage to a lesser degree, we are losing or seeking share where it makes sense to do that," Lake said.