JPMorgan Chase may have beat estimates in the third-quarter earnings report but the bank is preparing for the worst. According to Bloomberg, the bank could relocate thousands of employees based in New York to lower-cost areas before a possible economic recession hits. This could pave the way for JPMorgan to sell its investment-banking headquarters in New York after the relocations. The move could see New York cease being the compliance hub amidst the city’s high taxes and expensive real estate.
The plan is aimed at cutting costs. In the bank’s investment and asset-management group, the back-office employees will be the hardest hit. Some of the states where the employees could be relocated owing to their lower-cost status include Delaware, Ohio and Texas.
Bloomberg reports that hundreds of credit-risk positions have already been moved from New York to Texas. Currently, Texas has the highest number of JPMorgan Chase employees outside of New York. On the corporate side Texas charges low corporate taxes and this year ranked second in CNBC’s America’s Top States for Business survey in 2019. For employees, Texas does not charge state income taxes and the housing is relatively inexpensive.
While announcing results for the third quarter mid this month, JPMorgan Chase chairman and CEO Jamie Dimon warned that ‘there’s a recession ahead’. This was albeit with a disclaimer that the exact timeline couldn’t be foretold.
At the same time, Dimon argued that, if and when a severe economic downturn occurs, there would be ways to mitigate the pain:
“Remember, in a real recession, there are always opportunities to reduce your costs and vendors pull all those themselves, they will give you better deals and stuff like that. There are also huge opportunities to spending money wisely.”
The move coincides with the bank’s noninterest expenses increasing by 5% with the various divisions such as consumer and community banking, corporate & investment banking, asset & wealth management, and commercial banking all recording single-digit increases.
The corporate side, however, saw noninterest expenses growing by over 900% year-over-year. In the earnings report, JPMorgan Chase attributed the steep increase to higher investments in technology.
In choosing to relocate some of its back-office staff to lower-cost states, JPMorgan Chase is only following a trend that has been set by its rivals who have already moved employees away from Big Apple. This includes Wall Street investment bank Goldman Sachs which has built up operations in Utah.