JPMorgan will reinvest its $3.5 billion tax benefit in ‘communities’

JPMorgan Chase said it will use its $3.5 billion tax benefit on employee wages and community investments, executives said on an earnings call Friday morning. The bank will further detail its plans in the next few weeks. U.S. banks stand to gain significantly under the tax reform legislation that passed last month, which lowers the corporate income tax from 35 percent to 21 percent. One of CEO Jamie Dimon’s arguments for why the tax reform should happen was that it would boost wages, a point challenged by journalists and analysts on their respective conference calls Friday morning. “Most of it will fall to the bottom line in 2018 and beyond,” said chief financial officer Marianne Lake. “Time is an important part of how this plays out. We want to do really constructive, thoughtful things for all our constituents but it wont be the significant portion of that.” Bank of America, U.S. Bank, PNC Financial Services Group and Wells Fargo as well as other regional banks, have said they will use their anticipated savings to pay one-time bonuses to many of their employees or vowed to raise their wages. U.S. Bancorp, for example, is giving 60,000 of its employees a $1,000 bonus and raise its hourly minimum wage to $15 as a result of the overhaul; it will also improve its employee health plans in 2019. Fifth Third Bancorp plans to raise its minimum hourly wage to $15 and pay a one-time bonus of $1,000 to more than 13,500 employees. JPMorgan Chase and Bank of America increased their minimum hourly wages to $15 last year. “I like what companies are doing — doing stuff right away — but the really important quality will be the cumulative effect over the years of retaining capital and reinvesting it in the U.S. to drive jobs and wages.” Lake reinforced that investing in the bank’s existing businesses for growth and profitability has always been top priority for JPM. Expect the first thing it will do is continue to lean into those investments -- bankers, offices, global expansion, digital capabilities, payment capabilities its across all its businesses -- she said. Dimon added that the bank could accelerate some of that investments but it also considering how to pass some of its benefit onto the rest of the country’s growth. "We can only go so fast in hiring new bankers… we think it's time that all of America share broadly. We’re going to have things we think are good for some employees and sustainable growth for communities around the world… and we may well bite into that $3.5 billion, so be it.” JPMorgan’s net income for the fourth quarter of 2017 fell 37 percent from they year prior to $4.23 billion -- taking a significant one-time charge due to the recently passed tax bill. Earnings from consumer banking increased 11 percent to $2.6 billion on higher deposit margins.