In his annual letter to shareholders, JP
Morgan Chase CEO Jamie Dimon reflects on a turbulent 2009 after a
‘terrible’ year for their credit card business.
He added stricter regulation through the
Credit Card Reform Act would reduce profit by $500-750 million in
2010.
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He said: “By all measures, 2009 was a terrible
year for our credit card business. The economic environment drove
charge-off rates to an all-time high. Card services lost $2.2
billion. While I don’t want to diminish the negative overall
results, there were some positives. We were able to grow market
share in terms of accounts and customer spending; and our credit
loss performance which was 8.5 percent on Chase cards while poor,
was better than our competitors.”
The Credit Card Reform Act passed by Congress
in May last year placed further restrictions on U.S. credit card
issuers by prohibiting certain practices that were not considered
consumer-friendly.
“These changes alone are expected to reduce
our after-tax income by approximately $500 million to $750 million,
but this could possibly change as both consumers and competitors
change their behaviour,” Dimon said.
Despite the losses, Dimon remains optimistic
about the future, believing that aggressive product innovation is
key to the development of the credit card business.
He said: “We believe our new products will
help us rebuild trust with our customers. It is a process that will
take time, but if we focus on delivering useful products and making
financing easier for our customers, Card services will return to
being a business that is good for our customers and profitable for
our company.”
