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Few would describe Jamie Dimon as warm and cuddly. At one point during JPMorgan Chase & Co. (NYSE:JPM)‘s investor day, the feisty CEO responded to bank analyst Mike Mayo with a snarky, “That’s why I’m richer than you.” And while that could perhaps be waved off as playful, in the wake of the London Whale trading debacle and the CEO/Chairman brouhaha, there are plenty of investors and market watchers who simply can’t stand Dimon.
But I would suggest that even the harshest Dimon critics set aside their ire — even if just momentarily — and tune in to one particularly insightful moment from JPMorgan Chase & Co. (NYSE:JPM)’s second-quarter conference call.
Throughout the call, analysts peppered Dimon and CFO Marianne Lake with questions pertaining to the particulars of the company’s accounting — most notably, approaches to adjust the bank’s balance sheet to accommodate proposed new capital rules. Late in the call, NAB Research analyst Nancy Bush just happened to ask the question that pushed Dimon over the edge.
This is what the issue is with all this, you spend all your time talking about
accounting, as opposed to business. The business is deposits, serving clients,
doing things. And now we talk all the time about [accumulated and other
comprehensive income]. And we have a lot of asynchronous accounting, and
pro-cyclical accounting and stuff like that, that we try to explain. But we try to look
through all of that and build a business, more clients, more bankers, more branches,
Love him or hate him, I think everyone has to admit that Dimon nailed it there.
To be sure, the accounting is important. It’s critical that the bank get the accounting right, and it’s helpful for investors — even if just at a high level — to understand the accounting.
But the accounting isn’t the business. The Q2 linked-quarter change in operating expense isn’t the business. The year-over-year growth in the cash balance isn’t the business. And no, I’m sorry, but the profit per share that just beat (or missed) analysts’ expectations isn’t the business. (Full disclosure: I’m as guilty as anyone of focusing on the accounting too much at times.)
Foolish investors are long-term investors, and long-term investors should be most focused on what’s going to drive success over five, 10, or 15 years. And, as Dimon points out, that comes from focusing on and building the big-picture business, not getting swallowed up by the accounting minutiae.