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JPMorgan's Dimon expresses confidence in growth opportunities

Jamie Dimon has on multiple occasions this year cautioned that economic recession is all but inevitable — at some point.

But, at the JPMorgan Chase & Co. annual shareholder meeting May 15, the company's chairman and CEO exuded confidence in conditions both in the United States and globally, and he suggested that a downturn remains on the distant horizon. Dimon said that major economies are expanding, lending and other banking opportunities abound, and business potential for JPMorgan is strong for the rest of 2018 and into 2019.

"We believe that the underlying growth of the U.S. and global economy will continue to drive the future growth of our company," Dimon said at the event held in suburban Dallas.

JPMorgan is the largest U.S.-based bank by assets and serves as a bellwether. The company earned nearly $40 billion on a pretax basis in 2017, more than Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. JPMorgan projects pretax net income to climb into a range of $44 billion to $47 billion over three years.

Dimon said the company is keen for growth in multiple markets — just this week it announced a new CEO in China with expansion in mind — but he particularly emphasized domestic opportunities. He noted a previously announced plan to build up to 400 new bank branches over several years in 15 to 20 new U.S. markets, including Boston, Philadelphia and Washington, D.C. Dimon said small-business lending opportunities were of particular interest.

"As we enter these new markets," he said, "we'll also increase our small-business lending by 20%."

Observers said that small businesses collectively do appear poised to make more expansion investments, and many will use banks to finance that growth. Jack Ablin, chief investment officer at Cresset Wealth Advisors, noted to S&P Global Market Intelligence that a monthly survey by the National Federation of Independent Business has shown broad confidence among small-business owners in 2018.

Ablin said tax cuts passed late in 2017 have helped fuel optimism this year. "That's a good sign," he said. "Small business confidence is a good coincident indicator of economic strength."

All of that noted, Dimon said political and social challenges continue to drag on the U.S. operating environment, leaving plenty of room for improvement. While tax cuts have helped some business owners, not all Americans have benefited much. The job market is strong, but labor force participation is stubbornly low, Dimon said, in part because higher education is too expensive for many to acquire the skills needed to pursue better jobs.

Healthcare costs, he continued, are too high and businesses are burdened with excessive regulation. Immigration and trade policies are flawed, he added.

"Retracting from the world is not a solution," Dimon said, alluding to President Donald Trump's policies on the latter fronts. "At the same time, we cannot and should not turn a blind eye to the real pressures [of] globalization, technological advantages and other factors."

Dimon stopped short of specific prescriptions. But he said, "To confront these issues, we need a business community and government to come together and collaborate to find meaningful solutions." He pointed to broader tax changes and work skills training as conversation starters.

Separately, at the JPMorgan meeting, shareholders voted in favor of all board members up for election, and they voted against a proposal that would have required the company to separate the chairman and CEO roles upon Dimon's retirement.

Dimon said he would stay at the helm of JPMorgan for five more years.

Lee Raymond, chairman of the JPMorgan board's compensation committee, said at the meeting that succession planning is a key focus for directors.

"The firm has in place highly capable successors to Jamie and other members of the operating committee," Raymond said. He noted that veteran bank managers Daniel Pinto and Gordon Smith were recently promoted to co-president and co-COO roles and suggested that both were being groomed to potentially replace their boss. "These changes are consistent with the board's commitment to succession planning," he said.

JPMorgan observers had previously cited both men as contenders, along with CFO Marianne Lake.

Sam Pappas, president and CEO of Mystic Asset Management Inc., said in an interview that the issue of succession is critical at JPMorgan not because of any lack of potential replacements but because the bank has excelled for more than a decade under Dimon's guidance.

The next chief executive, "whoever it is, has big shoes to fill," Pappas, a big-bank investor, said. "Until the next CEO is set in stone, and until that person performs, this is always going to be a very big issue of interest."