Sunday, 24 June 2018

Dimon’s new inner circle emerges; Zames near the centre

Aligning your business with your customers is such a glaringly obvious thing to do that the only real question that immediately springs to mind vis-à-vis Jamie Dimon’s re-org of JP Morgan Chase is: how come it took so long?

IFR Editor-at-large Keith Mullin

IFR Editor-at-large Keith Mullin

I guess in the case of JP Morgan Chase, because Dimon didn’t want to be forced by external factors into articulating a succession plan for himself. This is how major business reorganisations inevitably tend to be seen, particularly when there is no clear plan and stakeholders are requesting one.

On the surface, collapsing the investment bank, global corporate bank and Treasury & Securities Services division into a unified corporate and investment bank with a single balance sheet and integrated coverage; and merging consumer and business banking, cards and auto and (eventually) mortgage banking into a community and consumer bank seems sensible but is hardly revolutionary.

And, rather oddly, Dimon left asset management and commercial banking adrift of the two monolithic new lines. Mary Erdoes – still seen by some as a contender for the top job – continues as CEO of asset management; Douglas Petno remains head of the commercial bank.

In further integrating most group businesses, Dimon is doing little more than following the lead taken by Brian Moynihan at Bank of America Merrill Lynch.

A little less than a year ago, Moynihan tapped Tom Montag to run all businesses serving companies and institutional investors (including middle market commercial and large corporate banking, institutional investor services as well as the global markets sales and trading businesses); and David Darnell to run all businesses serving individual customers and clients (deposits, cards, home mortgages, wealth management, small businesses etc). Both were also promoted to group co-COOs.

The divisional responsibilities at both BofA and JP Morgan emanating from these realignments are very broadly equivalent from the perspective of net revenue generation. At the management level, this is an important factor in keeping the human elements in balance (Wall Street-speak for intentionally competitive). In JPM’s case, the new set-up has four CEOs running the two new divisions, which will make for some interesting internal rivalries.

Dimon finally made his move on Jes Staley: pushing the former investment bank CEO into the chairmanship of the new CIB in effect moves him out of contention for the group CEO slot in a post-Dimon world. Mind you, this had been widely anticipated so ultimately caused little surprise.

The credit derivatives trading blow-up was perfectly timed for the 41-year old Zames – his handling of it does seem to have gone extremely well and hugely improved his reputation internally and externally

Making Mike Cavanagh (head of TSS) and Daniel Pinto (EMEA CEO for the group as well as head of global fixed-income) co-CEOs of the CIB – Cavanagh the first point of contact for banking (investment banking, global corporate bank and treasury services); Pinto for markets/investors (FICC, equities, prime services and securities clearing) – were seen to be well deserved promotions for two executives who for some time have been in the frame for greater things. Both continue to be seen in the small circle of possible Dimon successors.

But making Matt Zames group co-COO was the clearest sign of Dimon’s thinking around his succession. Until recently, Zames had been co-head of fixed-income with Pinto. This was a major promotion: as well as continuing to run the CIO and mortgage capital markets, Zames has added responsibility for finance and regulatory affairs. Barry Zubrow, head of corporate and regulatory affairs; and CFO Doug Braunstein now report to Zames rather than directly to Dimon.

I’d written at the end of last year that, all things being equal, I thought Pinto would have the edge over Zames in a succession race because even though they were both co-heads of global fixed-income, Pinto was older and had a more senior role (doubling as CEO of EMEA).

In this respect, the credit derivatives trading blow-up was perfectly timed for the 41-year old Zames – his handling of it does seem to have gone extremely well and hugely improved his reputation internally and externally. The most recent changes will have been in the works for a while. Has Zames been given the edge in Dimon’s succession thinking? It certainly looks that way. How he deals with his huge new portfolio – most of which is well outside his comfort zone of trading – will be his biggest test yet.


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