Overall expenses for JPMorgan Chase increased in the second quarter as the bank focused on hiring, tech investment and its integration road map for First Republic Bank.

The $3.7 trillion bank acquired First Republic Bank on May 1 after regulators stepped in to facilitate the sale of the spiraling bank.

This quarter, JPMorgan Chase started to work through plans to integrate FRB onto the JPMorgan Chase platform, Chief Financial Officer Jeffrey Barnum said during the bank’s earnings call today. The “systems integration is also proceeding on pace, and we are targeting being substantially completed by mid-2024,” he said.

WHY IT MATTERS: Since the acquisition, JPMorgan Chase has started evaluating 63 FRB branches for conversion to Chase, working through the development process of migrating FRB’s systems to the bank and onboarding 5,100 former FRB employees, according to the bank’s earnings presentation.

The acquisition saved FRB from being the next Silicon Valley Bank, which failed in March.

BY THE NUMBERS: JPMorgan Chase posted for Q2:

• Active mobile customers increased 10% year over year to 52 million;
• Active digital users increased 8% YoY to 60 million;
• Net income increased to $14.5 billion from $8.6 billion in Q2 2022; and
• The acquisition of First Republic Bank accounted for $2.4 billion of the Q2 2023 income.

NOTEWORTHY: In Q2, the bank’s technology, communications and equipment expenses fell 5% YoY to $2.3 billion, according to the earning supplement.

However, total expenses grew 12% YoY driven by office hiring and technology investments, according to the earnings presentation.

The bank continues to invest in “technology to improve, generally, scalability and get more of our costs base to be variable versus fixed in terms of how we respond to volumes. That’s a big part of the reason that we’re doing the investments that we are doing in modernization and cloud and AI,” Barnum said during the call.

For example, in Q2, JPMorgan started investing in AI to combat fraud and selected cloud-enabled, low-code platform Cleareye.ai to digitize its documents.

Although tech investment has created efficiencies, “there definitely is room for improvement,” Barnum said.

WHAT THEY’RE SAYING: JPMorgan continues to look to third parties for technology and for acquisition opportunities, according to Zacks Equity Research Report for JPMorgan released today. The report pointed to the bank’s acquisitions of FRB, Renovite and Viva Wallet.

[stock_market_widget type=”inline” template=”generic” assets=”JPM” markup=”{name} ({symbol}) is trading at {price} ({change_pct}) as of {last_update}” display_currency_symbol=”true” api=”yf”]