Is JPMorgan Chase & Co.'s Public Image Hurting Their Bottom Line?

A few months ago, JP Morgan Chase (JPM 0.65%) tried to initiate a Twitter meme known as #AskJPM. It was a strategic part of Twitter's initial public offering, for which JP Morgan had been the lead underwriter. The social media campaign was meant to give eager undergraduates a chance to talk directly to the bank's legendary vice-chairman and dealmaker, Jimmy Lee.

But things didn't go as planned.

Instead of inquires about career paths, the Tweets were loaded with thinly veiled (and some not-so-thinly veiled) animosity toward America's largest bank. McDonald's faced a similar fiasco in 2012 when the company sought out tributes on Twitter using the hashtag #McDStories. Of course, both these incidents were relatively small PR mishaps, but the real question is how much does a company's overall public image affect their earnings?

For banks like JP Morgan, the answer depends on which business segment you're talking about.

Consumer & Community Banking
There is evidence to suggest, unsurprisingly, that when banks gain a high degree of confidence from their clients, customer loyalty will quickly follow. A Gallup report shows that when consumers rate their levels of confidence in a bank, those with more faith in their banks are actually less likely to switch banks based on cost considerations alone. On the other hand, "low-trust customers switched because of better fees, prices, and products from other banks."But as seen below, a plurality of Americans, regardless of their age, do not have enough confidence in their primary bank.
In fact, Gallup suggests that a "good score" could be achieved if 50% of respondents felt a "great deal of loyalty", so we're way off the mark.

The data also points to increased skepticism among baby boomers, which is troubling considering how American demographics are changing. Baby boomers represent the largest share of banking customers and "[29%] of them have more than a $100, 000 in investable household assets, compared with 19% of Generation X and 12% of Generation Y".

None of this is to say that baby boomers are going to suddenly flee JP Morgan if the company has a bad press day, but it does mean that a coveted demographic can be poached if another bank offers them a better deal. And while JP Morgan does offer a better selection of products than its competitors, the company is vulnerable to a pricing offensive. Here's their report card on customer satisfaction relative-to-their-peers.

Data: J.D. Power 2014 Retail Banking Ratings

In comparison to the flashiness of investment banking, good ol' banking products like credit cards and automobile financing may seem staid, but they're proven cash cows.

In 2013, JP Morgan Chase's consumer side hauled in $10.7 billion of net income on a revenue base of $46 billion, as opposed to the investment bank's $8.5 billion on $34.2 billion. For those keeping score, that's a return on equity (ROE) of 23% and 15%, respectively.

Despite the numbers, it's unlikely that JP Morgan Chase will pivot to a consumer banking strategy unless they're forced to, so what's the likelihood of that happening? Actually, it might surprise you. 

Trading vs. Banking
A number of JP Morgan's rivals, including Morgan Stanley (MS 0.20%), Credit Suisse (CS), and Barclays (BCS 1.54%), have announced major staff cuts to their investment bank divisions.The moves come amid lower trading revenues across the industry, raising questions about the long term viability of trading as a key profit center.

That's why Marianne Lake, JP Morgan's CFO, warned investors that second quarter fixed income and equities trading would be 20% lower than the same period last year.