Where JPMorgan stands on mortgages, branches, mobile payments

Mortgage

A top deputy at JPMorgan Chase on Thursday shed more light on what changes the bank may make to its mortgage business.

Executives are exploring how to streamline the home loan writing process, JPMorgan’s co-Chief Operating Officer Gordon Smith said at a conference hosted by Bernstein Strategic Decisions Conference.

It typically takes more than 40 days to close a mortgage from the time an application is submitted to funding, according to a report from technology company Ellie Mae in April.

Gordon Smith, CEO of consumer and community banking at JPMorgan Chase

It’s not just about digital

“The early signs are that the new branches are going to be very profitable,” JPMorgan Chase co-COO Gordon Smith says. It is in the process of establishing the first 15 or 20 of what would be hundreds of new branches, he says.

Smith echoed CEO Jamie Dimon’s recent comments in a letter to shareholders and on an earnings call about how rising costs and regulations are pushing more banks to consider exiting the national mortgage market.

“We’re trying to deal with all of these things and say, can we simplify the mortgage experience?” said Smith, who is also head of consumer and community banking. “Can we make the mortgage experience much simpler for the customer to understand with a much more certain outcome in terms of when the mortgage is likely to close and take out an awful lot of the processing that takes place to cut cycle times as well.”

Smith also offered updates on the bank’s branch expansion, the impact of the U.S.-China trade war on commercial clients and the challenges of expanding Chase Pay.

Good start to branch expansion

JPMorgan’s early progress on its massive branch expansion into new markets across the U.S. has been “really encouraging,” Smith said Thursday.

It only at the point of establishing the first 15 or 20 branches of what would be hundreds of new sites, according to Smith.

Of the bank’s roughly 5,000 existing branches, only five are failing to turn a profit today, he said.

“The early signs are that the new branches are going to be very profitable,” Smith said.

Trade ‘thunderstorms’

Smith said the bank had a good first quarter on the consumer side, but trade disputes between the Trump administration and China are hanging over their commercial clients.

“The trade war is clearly going to have a meaningful impact on the economy,” Smith said. “That’s a real concern. It’s understandable that markets are alarmed by it.”

Smith did say the U.S. consumer is in “really good shape” and that the core economy is “very positive.”

“If we were to hear an announcement that said that there’s encouraging progress on trade negotiations, I think people would feel like a lot of the thunderstorms will start to blow away,” Smith said. “If the reverse happens, then my guess is that we would start to see a deterioration.”

Disappointed with Chase Pay growth

The bank has had a difficult time building a network for its mobile payments business, including Chase Pay, Smith said.

“It’s been an awful lot slower than we expected,” Smith said. “We would have hoped that we could have grown that much more quickly than we were able to.”

The bank has been striking deals with retailers, and Smith added they are looking forward to “near-field-communication” abilities like tapping cards at subway stations, which is currently being tested.

He warned that a potential downturn in the economy could spell trouble for the bank’s hot financial technology competitors.

“I do think a recession will bring some surprises to some of the newer entrants,” Smith said.

Hoping Dimon sticks around

Smith said he hopes CEO Jamie Dimon will be sticking around even amid recent moves indicating the largest bank in the world is preparing for a successor.

“I hope he keeps going with his role in five years,” Smith said.

Last year Dimon said that he planned to stay at the helm for five more years. Smith, 60, is considered a possible CEO candidate if Dimon were to leave sooner than that; other, younger executives are thought to be vying for the job if Dimon stays on as long as planned.

Who replaces Dimon has been a subject of much speculation outside the bank, but internally, executives are busy arranging successors for more than just the CEO suite, Smith said.

“What we all worry about is yes the CEO, but who are the 15 people or so that will be on the operating committee of the firm that will steer it for the next decade,” Smith said. “No one person can go into that role and run it by themselves.”

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