JP Morgan Chase 2014 Annual Report Download - page 10

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I. AN OUTSTANDING FRANCHISE
our target margins in a normal environment
and, most important, our return on equity
(ROE). On most of these measures, we are
very close to the best-in-class competitor.
A good company should be able to earn
competitive margins over an extended period
of time regardless of economic conditions while
investing and without taking excessive risk
Any company can improve earnings in the
short run by taking on additional risk or
cutting back on investments. Any company
can grow rapidly if it takes on too much
risk – but that usually is the kind of growth
one comes to regret. Our margins have been
quite good, even as we have been investing
for the long run. These investment expenses
lower our short-term returns, but they
are “good” expenses. In addition to the
tremendous amount that we invest annu-
ally in technology and infrastructure, some
examples of where we have invested over
the past five years are:
– 448 retail branches in the United States
– 28 wholesale oces abroad
– 2,498 Chase Private Client locations/
branches, supported by 594 new Private
Client advisors
– 20 Commercial Banking expansion cities,
including approximately 350 Commercial
Banking bankers
– 205 small business bankers
A good company always should be investing
while it also is waste cutting; i.e., cutting
out any unnecessary expenses. However,
I often have received bad advice on what
are unnecessary expenses. For example,
spending on important strategic o-sites,
research and development for innovation,
marketing that has a positive return – those
are good expenses. We take a bus trip annu-
ally to visit branches, operating centers
and clients. It is both fun and enormously
productive – and it is not an unnecessary
expense – it makes us a better company.
Even our annual Retail National Sales
Conference with the top 5% of our branch
bankers, loan ocers and tellers is critical –
we spend time working together, we learn
a lot and we get to thank these outstanding
employees at an awards recognition dinner.
While it is perfectly reasonable in tough
times to dramatically reduce the cost of that
conference, it is unwise to cancel it. I have
been to every single one of these events since
I started running Bank One, and I intend to
continue that tradition.
We earned adequate returns while building an
increasingly stronger capital base
During these challenging years, our company
has confronted dicult markets, billions of
dollars of additional regulatory costs, billions
of dollars of costs due to changes in prod-
ucts and services, and, unfortunately, very
high legal costs. And we have had to hold
an increasing amount of capital throughout
this time. While there is no question that
these events did reduce our performance and
returns, we have been able to adapt, meet the
new rules and perform fairly well financially.