JPMorgan Faces `Challenging' 2009, Rebound in 2010

By Cathy Chan

Nov. 4 (Bloomberg) -- JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said the company faces ``highly challenging conditions'' next year, while projecting a possible ``strong recovery'' in 2010.

Speaking to 550 employees in Hong Kong yesterday, Dimon also said the acquisitions of Bear Stearns Cos. and Washington Mutual Inc., both victims of the credit crunch, will help JPMorgan's performance in the ``longer term,'' according a document seen by Bloomberg News and confirmed by a person in attendance. JPMorgan spokesman Ray Bashford declined to comment.

Dimon, 52, also questioned the ability of Asian economies to weather the fallout from the deepest financial crisis since the Great Depression. The region so far has evaded the worst of the contagion that toppled Lehman Brothers Holdings Inc. and forced Merrill Lynch & Co. to sell itself.

``In Asia it's going to get worse than you think,'' he told employees at the Hong Kong Convention Centre. ``I don't think Asia can avoid the fallout from the global problems.''

Wall Street executives including Merrill CEO John Thain and Citigroup Inc. Chief Financial Officer Gary Crittenden have signaled economic contraction will weigh on profits into 2009. Dimon said last month he will set aside more money to cover loan losses and predicted the slowdown will last longer and strike deeper than many had previously expected.

JPMorgan on Oct. 15 posted an 84 percent drop in third- quarter profit, and Dimon forecast earnings will decline in coming quarters. The stock has lost 6.7 percent this year.

Shanghai Meeting

While forecasting more difficult conditions in Asia in the short term, Dimon said the region has potential for `very substantial natural growth'' over a longer time horizon.

Economic growth in Asia will be ``robust'' this year and next even as the U.S. financial crisis cools global expansion, Asian Development Bank President Haruhiko Kuroda said in an Oct. 9 interview. He forecast the region will grow 7.5 percent this year and 7.2 percent in 2009.

Dimon's Asia tour included a stop in Shanghai, where he joined the J.P. Morgan International Council for its annual two- day meeting, the document said. Attendees included former U.K. Prime Minister Tony Blair, former U.S. Secretaries of State George Shultz and Henry Kissinger; and Lee Kuan Yew, Minister Mentor of Singapore.

JPMorgan may increase staff in India and the Philippines in coming years because they serve as ``major international hubs for outsourcing of support functions,'' Dimon said.

The CEO also said an expected increase in government regulation may take time to impact JPMorgan, as any changes would have to ``go through the legislative process,'' according to the document.

To contact the reporter on this story: Cathy Chan in Hong Kong at kchan14@bloomberg.net