JPMorgan to continue building branch offices, CFO says

Despite the prospect of low lending rates for years to come, JPMorgan Chase & Co will continue to build new branch offices to take in more deposits to make loans and support some of its business franchises, a top bank executive said on Tuesday.

"Even in the current rate environment, deposits are a very good business," Chief Financial Officer Doug Braunstein said at an investor conference after being asked by a stock analyst if the company would consider spending less on new branches.

The company's 5,600 U.S. branches, second in number only to Wells Fargo & Co , have been important to the company's 18 percent growth in deposits, to $1.1 trillion, over the last 18 months, Braunstein said.

Besides catering to individuals with bank accounts, credit cards and home loans, branches also support the company's services to small and mid-sized companies and its offerings of investment products to the affluent.

"Branches are core to our business," Braunstein said.

Stock analysts and institutional investors have been increasingly pressing bank executives to justify building and maintaining branches when profit margins on deposits are at historic lows and when the Internet and mobile phones allow people to make more purchases without cash or make deposits without going to a bank. Some banks, notably Bank of America Corp , have been closing branches to save money.

But Braunstein, speaking at a Goldman Sachs conference, argued that this is a time for JPMorgan to spend to take market share of deposits and use branches to cement its relationships with customers. When the Federal Reserve allows lending rates to rise again, JPMorgan will make more money, he said.

"To the extent the rate environment normalizes over time - and it may take some time to do so - there is going to be significant upside," he said.

Taking questions on other topics, Braunstein said that big banks are in better shape to undergo next year's round of Federal Reserve stress tests of their capital plans, which can call for spend cash dividends and stock buybacks.

Compared with past stress tests, bank portfolios are of high quality because a lot of bad loans have been written off. Banks have also had time to earn money and build up their capital cushions. And they have learned how to improve their test scores by going over past results and talking with examiners, he said.

The chance of failing the stress tests has also been reduced because in the current round the Federal Reserve will allow failing banks a chance to submit a more cautious plan, he noted.

The Fed has said it will publicly disclose plans that are rejected and resubmitted. Bank of America CEO Brian Moynihan, at the same conference earlier in the day, said he plans to avoid having to redo his bank's plan.

Braunstein also said that fourth-quarter revenue from capital markets is running 15 percent to 20 percent below the third quarter, but should still be higher than a year earlier.

He reaffirmed past assessments from JPMorgan CEO Jamie Dimon that JPMorgan should be able to make $24 billion in annual profit in more normal times. In recent years the company has fallen short of the goal as it recognized losses on mortgages and credit card loans and received lower rates of interest on loans.

In 2011, JPMorgan reported $19 billion in net income.

JPMorgan shares were down 0.7 percent at $40.54 in late afternoon trading on the New York Stock Exchange.

(Reporting by David Henry in New York, editing by Nick Zieminski)