The Dodd-Frank Act requires banks to move derivatives trading to separately capitalized subsidiaries, which JPMorgan Chase is in the process of doing.
CEO Jamie Dimon says it will cost the New York bank $1 billion in lost revenue as standard derivatives must be traded on exchanges, rather than over the counter.
"It's an operational nightmare," Dimon said on a July conference call with analysts, of the bill's restrictions on derivatives trading. "In my opinion, it's highly ill-conceived, doesn't reduce risk at all."
Dimon says he is looking for ways to pass on all of the extra regulatory costs to consumers and corporate clients. Fewer borrowers will get loans and credit cards, he says. He estimates that the passing on of costs will reduce the bank's retail customer base by about 5 percent.
"We are going to earn it all back, whatever the number is," Dimon told investors at a Sept. 14 conference hosted by Barclays Capital in New York.
The bank hopes to replace some of its lost profits by expanding overseas, particularly in the booming BRIC countries: Brazil, Russia, India and China.
"These emerging markets, primarily in Latin America and Asia, offer much better economic prospects than the U.S. or Western Europe," said Anthony Polini, an analyst at investment bank Raymond James Financial. "JPMorgan is ramping up to go head to head with Citigroup."
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