NEW YORK: JPMorgan Chase & Co. is emphasizing transparency and culpability as it weathers a crisis that could adversely affect it and other financial services institutions.
The company acknowledged last week that it lost approximately $2 billion after a faulty investment strategy. Since then, reports have indicated that the trading losses actually surpassed that figure and were closer to $3 billion. The situation has prompted calls for more regulation of big banks.
JPMorgan is stressing that it made a mistake in an effort to revive consumer trust, which has been low since the financial industry meltdown of 2008.
“The message is ‘we made a mistake; we were sloppy,'” says Joseph Evangelisti, global director of corporate communications at JPMorgan. “We're sorry and are working to make sure it doesn't happen again. We're a very strong company and we'll be OK.”
To get its message across, the company is working to convey authenticity by making its top executives, including CEO Jamie Dimon, available to speak to the media. Its goal is to give as complete a picture as possible of what happened in frank terms. JPMorgan representatives gave about 500 press briefings in the last four business days alone, according to a company representative.
The massive trading loss has also hurt the reputation of Dimon, who has been a visible industry spokesman on regulation, such as the 2010 Dodd-Frank financial reform bill. For Dimon to restore his previous standing, the bank must maintain good performance and make good decisions, according to a JPMorgan representative.
So far, analysts don't appear too concerned about the loss, noting that the bank is on pace to earn a $2 billion profit in the second quarter nonetheless.
However, JPMorgan's woes are not helping the work that the bank and its competitors have done in recent years to rebuild consumer confidence. In the most recent version of its Trust Barometer, Edelman reported that it would take a decade for the financial sector to regain the trust of the general public.
“It's hard for the general public to differentiate between individual banks,” notes Donna Peterman, EVP and CCO at PNC Financial Services Group. “What JPMorgan did is probably unique to JPMorgan, but the general public may not know that.”
Other financial services institutions are also worried that their firms might be impacted by the situation. Despite having a different business model than JPMorgan, Kathryn Beiser, VP of corporate communications at Discover Financial Services, says companies like hers could still be affected by new regulation.
“There is a ripple effect as it puts [the financial services industry] under the intense scrutiny of regulators,” she said.
However, none of the financial services companies contacted by PRWeek are conducting a proactive communications effort to distance themselves from the situation.
Although he declined to specifically comment on JPMorgan, Oscar Suris, EVP of corporate communications at Wells Fargo & Company, said most companies focus on what matters to their own stakeholders when a crisis hits an unrelated company in their industry.
“In an environment with a lot of reputation challenges, the best thing you can do is focus on what you can control,” he explained.
Individually, Discover, PNC, and Wells Fargo have conducted efforts to build trust with their own stakeholders. These initiatives included helping consumers in mortgage debt, funding education initiatives, or unveiling programs to make managing their accounts easier.
Agency-side executives are praising JPMorgan for its handling of the situation. Jeff Zilka, GM of financial communications at Edelman, said Dimon is right to proactively communicate and put himself front and center. To help his personal reputation, once the company externally discloses the details of the loss, “he should ascribe it to individuals as opposed to systemic problems, and as a result say sweeping financial reform is not required,” he said.
Scott Tangney, EVP at Makovsky + Company and manager of the firm's financial services practice, explained that the bank should better explain how it manages risk.
“What this does is shed light that at every bank there is risk taking and this is how [JPMorgan] does it,” he said.