JP Morgan
Transcript: Corporate Structure (Internal Element) London Whale Matt Zames (41) Chief Operating Officer Succession Tragedy How does JP MorganChase Stack Up? Corporate Structure (SWOT) Source: Financial Times Industry Fee Origination Jes Staley (55) Left for BlueMountain Capital Corporate Structure (Internal Elements) 2012 was an outstanding year for emerging market debt EM fixed income delivered high returns in 2012 Sovereigns in these markets are now seen as a flight-to-quality trade EM corporate bonds reached a milestone supply of $300 billion and the debt stock exceeded $1 trillion. EM debt remains intact. Ratings upgrade trends will continue into 2013. Sandy Weill Revenue Sources Mary Erdoes (45) Chief Executive of Asset Management Arm Dimon's risk management 'genius' Avoiding succession tragedy Shuffling of top management team signals potential chief executes puts them 'through the paces' so to speak Long-Term Strategic Outlook Moody's Downgrade Market Environment (External Elements) JP Morgan Chase Fast Facts Strategic Succession Strengths and Opportunities Low cost of funding Synergy and Cross Selling Shift towards commercial banking Weaknesses and Threats Managerial Diseconomies and risk Systemic Risk due to globalization Heidi Miller (58) Retired as President of International Operations Future of Investment Banking Daniel Pinto (49) Co-Chief of Corporate & Investment Bank Revenue and Net Income of Other Firms Executive Reshuffling given this bet on size, mishandling succession will be that much more dangerous CEO's often surrounded fortunately, Jamie Dimon's management foresight will be one of JPMorgan's key strengths Tighter regulatory environment = lower profits from certain 'risky' investment banking activities raised capital reserves & less leveraging Volcker Rule Emerging markets growth drives long term potential in commodities helps expand global capital market cap Uncertain sovereign risk = bearish bond market Jamie Dimon (Leadership Element) JP Morgan Around the World Who is JP Morgan Chase? Jamie Dimon (Leadership Elements) -Cost of doing business is going up -Firms are leaving -Short term: >Improve productivity -Long Term: >Cut non-core businesses >Regulations constrain bank's ability to invest >New Sources of Revenue Emerging Markets are vital in a period after recovering from hardship (Post Financial Crisis) have emerged Market Environment (External Environment) EMERGING MARKETS Market Environment (External Element) "...Let's be clear: Banks should not be big for the sake of being big. Moreover, regardless of a company's size, it must be well managed..." - Jamie Dimon FRAMEWORK FOR GLOBAL SUCCESS Popular Industry-Wide Products by Quarter Recent events and JP Morgan-2008 Crisis – “Too big to fail”: government bailout in the picture -> potential moral hazard does not have a visible presence on JPM bc of Jamie? -Consequences of the crisis: regulations•Basel III – more capital requirement (Morning Star’s report agrees that it’s not a problem); -> Return on equity decreases, but they still have positive EVA (Economic Value Added)•Dodd-Frank Act – Derivatives markets are affected (“Juicy spread driven down because of the required electronic platform)-> Volcker Rule = reducing risky activities (flow trading* decreases -> ROE decreases)* flow trading occurs when a firm trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments, with funds from a client, rather than its own funds The The Royal Court Doug Braunstein (50) Chief Financial Officer 8 offices opening next year 19 offices opened last year including office in Abu Dhabi broaden executive management pool broaden pool's lateral corporate experience shows foresight and confidence to investors simultaneous corporate restructuring signals an awareness of new market realities new merged corporate and investment business lines this new strategic approach hinges on JPMorgan's scale and diversification Michael Cavanagh (46) Co-Chief of Corporate & Investment Bank Big global businesses need big global banks Synergy integrated corporate and investment bank "strategic logic" save overhead costs Diseconomies of scale Risk management Restrutcturing reflects shift towards commercial banking Jamie Dimon Corporate Structure (Internal Elements) Jamie Dimon (Leadership Elements) JPM leader in emerging markets fixed income— from research to sales, trading and financing. Vast global footprint caters for different solutions. Servicing clients across origination, derivatives, trading, foreign exchange and research Business is a stand-alone unit organized globally, which enables the firm to respond quickly to meet local and international clients' increasingly complex needs Competitors got downgraded as well They choose to meet capital requirements (Basel III) before time to regain investor confidence -> internal capital generation + adjusting risk-weighted assets Being conservative in a volatile regulatory environment creates trust