Jamie Dimon - Wall Street's banking icon

At an investment conference on June 1, the chairman and CEO of JPMorgan Chase, Mr Jamie Dimon, made global headlines when he warned of a possible hurricane hitting the world economy. "Right now, it's kind of sunny, things are doing fine, everyone thinks the Fed can handle this," he said. "That hurricane is right out there down the road coming our way. We just don't know if it's a minor one or a Superstorm Sandy."

"I'm not forecasting that," he clarifies, in an interview at the bank's swanky new offices in Market Street, which he officially opened last week. There are multiple possible outcomes he points out. "There's a chance of a soft landing, there's a chance of a mini-recession, and there's a chance that things will get much worse."

For now, the US economy is doing very well, he says. "The consumer has a lot of money, there are plenty of available jobs, wages are going up and the business community is in good shape. So, if you look out the next nine to 12 months, the picture looks very good."

But he warns of "countervailing forces" that could come to a head in 2023: rate hikes and quantitative tightening by the US Federal Reserve; the war in Ukraine and the sanctions that have followed, leading to soaring prices for oil, gas and wheat; weakening economies in Europe and rising risks in China. "We also have to bear in mind that wars are unpredictable," he points out. "So, all of those things are out there and I'm just recognising them."

Mr Dimon is a banking icon. Having helmed JPMorgan since 2005, he is the longest-serving CEO of any major international bank. A throat cancer survivor who also had emergency heart surgery two years ago, he is still going strong at the age of 66 and, under his leadership, JPMorgan has also gone from strength to strength. It is the world's largest bank by market capitalisation. Since the global financial crisis in 2008, its deposits and client assets have almost tripled to US$6.95 trillion (S$9.66 trillion). Last year, its net income jumped more than 65 per cent to US$48.3 billion on record revenues of US$125.3 billion. And it has one of the lowest ratios of overhead costs to revenues among its peers and the highest returns on equity.

But it's bracing itself for the headwinds to come. One of them is the cycle of rising interest rates, which has already started and is likely to persist at least through this year. In his letter to shareholders in April, Mr Dimon said that JPMorgan is prepared for this.

"The best way to prepare if you're a bank is to run a really good bank," he says. "To have good margins, good capital, good clients, good liquidity. I know the cycles and even if I don't predict them, I know we have to be prepared for them."

"If you look at JPMorgan, we're very careful on credit. Most of our consumer credit is prime. We've got some of the best clients around the world. We have very good margins, capital and profitability, so we're already in good shape. And there's a lot we can do to tweak our exposures, some of which we have already done. And keep in mind that if rates go up, it actually helps us." Banks typically earn higher margins on their loans with higher rates.

But he acknowledges that if stagflation were to set in - that is, a recession combined with inflation - it would be a different story. "We would have the benefit of rates going up but also the negatives of bad volumes and higher credit losses. Stagflation would create a lot more risks for our company."

Another challenge JPMorgan is up against - as are other traditional banks - is the growing competition from fintechs and "neobanks" as well as technology giants such as Apple, Google and Amazon, which are grabbing parts of the banking business, such as mortgage origination, fund transfers and micro-lending. Compared with traditional banks, they also have lower overheads, less legacy technology and easier regulation.

That's all true, says Mr Dimon, who is not betting on a more level playing field. "We're quite conscious of fintech and big tech - what their capabilities are, the size of their platforms and their infrastructure. But a lot of them don't survive - they're not making money and you can't not make money forever. Interest rates going up also makes it harder for them, not easier."

JPMorgan is well placed to compete, he says. "We have some of the best parts of the consumer business, and we're investing heavily to do things better, faster, cheaper." Indeed, the bank will spend US$14 billion on technology this year with more than US$6 billion in new investments alone - way more than its peers.

It has also been making acquisitions, but selectively. JPMorgan's first choice is organic expansion. "This is a lesson I've seen others learn the hard way - over and over again," says Mr Dimon. "If you think you can save your business by doing M&A, you're probably making a mistake. For us, organic growth applies to countries, clients, technology, systems, marketing, communications - everything we do that makes us a better company. We grow ourselves, and we do that everywhere."

"Yet, sometimes you buy something that helps you do a better job faster," he says. "We might be able to do it ourselves, but it'll take us years. Some are no-brainers. For example, Viva gave us payment capabilities in Europe that we simply didn't have," he says, referring to JPMorgan's acquisition of a 49 per cent stake in the Athens-based payments fintech Viva in January. In March, the bank entered into an agreement to buy Global Shares, an Ireland-based provider of cloud-based share management software - another capability that JPMorgan lacked.

But it has also made acquisitions that Mr Dimon describes as "off the beaten track". One was the luxury travel agency Frosch in February, after the bank had already bought part of the credit card rewards company cxLoyalty at the end of 2020 - just as the travel business was starting to take off again after the pandemic. "One-third of all travel in the US goes on our credit or debit cards, and a portion of it goes through our own travel sites," Mr Dimon points out. He is betting that the travel and rewards-related acquisitions will boost that segment of the bank's business.

JPMorgan has even ventured into the world of dining by buying the restaurant recommendation website called The Infatuation, which includes the restaurant review platform Zagat, with a view to growing its share of dining-related expenditure via special deals through its credit and debit cards.

Another niche acquisition, completed last year, was the US college planning service Frank, which helps students apply for financial aid, enrol in online courses and get scholarships. Students are a key target segment for JPMorgan, says Mr Dimon. "They'll get a card and a checking (current) account and they'll have it for the rest of their lives." He adds that the bank also has customised strategies to target other growing segments, such as millennials, lower-income and mass affluent customers.

But one area that has been conspicuously absent from JPMorgan's growth strategy so far is retail banking outside the United States. "I've been very clear that it's virtually impossible to compete in physical retail banking," says Mr Dimon. "I'd need to have 50 branches here and 50 branches in other Asian cities. But, in the States, if I have 50 branches and want to expand, I just need to add the cost of more people in the branches and rent. I don't need to add products, services, risk and fraud management, compliance, language and call centres. Here, I'd have to do all of that."

But digital banking may be opening up new opportunities, he says. "That's why we've gone into retail in the UK." JPMorgan's first digital-only bank was launched in London last September, under the Chase brand. The strategy for expansion is slow and steady, starting with current accounts supplemented by the services of a robo-investment bank that JPMorgan acquired last year.

"Over time we'll add more products and more countries. We have staying power and, I think, a pretty good chance of winning over a long period of time," says Mr Dimon.

Will JPMorgan launch a digital-only bank in Asia?

"We might," he replies. "But we can use the platforms we build for other things. So whether we do a digital bank or not, we can use our platforms to serve, for example, private banking clients anywhere in the world."

For now, Mr Dimon is pleased with the progress of the bank's Singapore operations. "We've been slowly expanding here for the better part of 58 years." he points out. "We have about 3,500 people here now. Our investment bank and private bank are growing. We've started commercial banking operations. And Singapore is a tech centre, with more than 2,000 technologists, as well as our global cyber-security centre."

Asked to define the purpose of JPMorgan, Mr Dimon says: "Wherever we go, we help companies, individuals, communities and countries to grow and thrive. We do that through financial services. It's a risky business. But we manage the risk to benefit our clients. We're not betting the shop on risk, we're betting the shop on our clients."

He points out that an important part of sustaining the bank's success is guarding against complacency. "There's a disease that I call ABC - arrogance, bureaucracy and complacency, which leads to stasis and death," he says. "I'm a fanatic about preventing all of those things. I like to celebrate our successes, but I also spend a lot of time on what we don't do well. What does the competition do better? How did we miss that? It takes intellectual honesty and curiosity. And the whole management team - they're pretty much the same.

But singularly among the team, Mr Dimon has acquired a cult-like status, certainly in the eyes of public opinion, and perhaps even among his employees. I wonder aloud if he is concerned that he has personally come to define the brand that JPMorgan has become. He dismisses the idea. "The company has more than 250,000 people. You may not know Daniel Pinto or Mary Erdoes," he says, referring respectively to the bank's president and chief operating officer and the CEO of its asset and wealth management business. "They're exceptional people."

He says: "In many companies if the CEO's hit by a truck, they ask themselves where's the successor? In JPMorgan, the board has a clear succession plan. So, when I'm gone - and it won't be much longer than four or five years - the company will do just fine."