JPMorgan is hoarding money as a result of “superb likelihood” inflation will stay

Jamie Dimon, CEO of JP Morgan Chase, will perform on CNBC’s Squawk Box at the 2020 World Economic Forum in Davos, Switzerland, on January 22nd, 2020.

Adam Galica | CNBC

Jamie Dimon believes cash is king – at least for now.

JPMorgan Chase has “effectively stockpiled” cash instead of using it to buy government bonds or other investments as higher inflation could force the Federal Reserve to raise interest rates, Dimon said during a conference Monday. The largest U.S. bank by assets has positioned itself to benefit from rising interest rates that will allow it to buy higher-yielding assets, he said.

“We have a lot of money and capacity and we will be very patient because I think you have a very good chance that inflation will be more than temporary,” said Dimon, longtime CEO of JPMorgan.

“If you look at our balance sheet, we have $ 500 billion in cash, we actually have more and more cash on hand, waiting for opportunities to invest at higher rates,” said Dimon. “I expect higher interest rates and more inflation, and we are prepared for that.”

Dimon plunged into the ongoing debate over whether the higher inflation was due to temporary aspects of the reopening like raw material shortages or supply chain issues, or whether it could be more permanent. Fed officials have called the current surge in inflation temporary, which means temporary and short-lived. But there are growing voices, including Deutsche Bank economists and hedge fund billionaires, warning of the consequences of ignoring inflation.

The bank’s move to amass cash accounts for about half the decline in expected net interest income this year, Dimon said. The other half comes from lower credit card balances, he said. The bank now expects net interest income of $ 52.5 billion in 2021, up from the $ 55 billion it announced in February.

In the broad discussion, Dimon attacked several well-known issues. He warned that banks are threatened by fintech and big tech players, including PayPal, which has a larger market capitalization than almost all US banks.

Dimon announced that the bank’s automated investment service, You Invest, has raised approximately $ 50 billion in assets, despite “we believe it’s not even a very good product”.

The bank’s trading revenue in the second quarter will be “slightly north of $ 6 billion,” lower than the “extraordinary” period a year ago, Dimon said. Investment banking revenues are roughly 20% higher than a year ago and could be one of the bank’s best quarters due to strength in merger advice and equity and bond issuance, he said.

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