Dimon acknowledged in his annual letter to shareholders, released Wednesday, that the nation’s largest banking company is still smarting from its repeated run-ins with regulators, but he devoted the bulk of his message to looking ahead.
He touted the company’s latest efforts to make the most of Big Data, noting that a group of experts is working to find ways to use the data to give merchants insights about their customers, help consumers validate credit reports and allow clients to manage their collateral positions.
Cybersecurity was another major theme, with the holiday season’s massive Target data breach still fresh on Dimon’s mind. Dimon acknowledged the dangers posed by both direct attacks from hackers as well as attacks via third-party vendors and other outsiders. JPMorgan Chase is now building three cybersecurity operations centers in its regional headquarters to coordinate information about potential threats, he said.
“By the end of 2014, we will have spent more than $250 million annually with approximately 1,000 people focused on the effort” to beef up defenses against internal and external threats, Dimon said.
Still, Dimon was candid about the toll the legal woes took on the company.
“The bad news was bad,” Dimon said. “The most painful, difficult and nerve-wracking experience that I have ever dealt with professionally was trying to resolve the legal issues we had this past year with multiple government agencies and regulators as we tried to get many large and risky legal issues behind us.”
The company agreed in November to pay federal regulators a record-breaking $13 billion to settle charges related to the quality of mortgage-backed securities it sold before the housing crisis. Dimon also acknowledged that the bank is still feeling the effects of the 2012 London Whale trading scandal, which cost the bank $6 billion in losses and another $1 billion in legal settlements.
“Suffice it to say, we thought the best option, perhaps the only sensible option…was to acknowledge our issues and settle as much as we could all at once, albeit at a high price,” Dimon said.
Despite its troubles, Dimon noted that the bank still managed to earn $23 billion in 2012. Meanwhile, Dimon himself appears to have the full confidence of the bank’s board, which voted in January to give him a 74% raise. (The board slashed his salary in half in 2012.)