JPMorgan's increased tech spending will let it 'develop products at speed': analyst

By Steve Gelsi

Citi analyst Keith Horowitz looks at plans by bank to boost its annual tech spending to $17 billion

A top JPMorgan Chase & Co. executive in a meeting with Citi analyst Keith Horowitz outlined the bank's continued focus on investing in technology as a way to grow its business, according to a Tuesday research note.

JPMorgan Chief Operating Officer Daniel Pinto emphasized the bank's efforts to build up its technology capabilities with an investment of $17 billion in 2024, up about $1.5 billion from the previous year's spending, Horowitz said.

"We spent a lot of time on his views on the importance of technology modernization, and how that will give [JP Morgan] the ability to innovate and develop products at speed as well as reduce the cost to operate the business over time," Horowitz said.

The bank is moving its core platforms for deposits, credit cards and mortgages to the cloud as it replaces older technology.

It's also shaping an in-house platform for its international consumer business.

"Daniel believes [JPMorgan] has a head start as they began investing earlier than banking peers but [he] acknowledged there is still a long way to go," Horowitz said.

Pinto also said use of artificial intelligence has saved JPMorgan Chase up to $1.5 billion so far as it boosts efficiencies and helps manage fraud and many other tasks such as credit decisions, Horowitz said.

"Daniel sees a significant opportunity for AI to reduce the human capital intensity in operations, call centers, tech developers, and corporate functions such as compliance and risk," Horowitz said.

JPMorgan has also been focused for the past decade on payments as a large market opportunity.

"[JPMorgan] is no longer at any competitive disadvantage to fintech peers such as Square, Stripe, PayPal, Adyen, etc.," Horowitz said.

Horowitz reiterated a neutral rating on JPMorgan Chase given the strong performance of its stock this year. He kept the bank's price target at $205 a share.

JPMorgan Chase's stock (JPM) is up 0.8% on Tuesday. The stock has risen 15.5% in 2024, ahead of the 15% rise by the S&P 500 SPX.

At its investor day on May 20, JPMorgan said about 70% of its data now runs over the public or private cloud, while about 50% of applications conduct their processing in the cloud. About 80% of production applications now reside in the public cloud and strategic data centers.

-Steve Gelsi

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06-18-24 1019ET

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