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July 28, 2012 1:08 am
Change at the top should not come for “many years”, Mr Dimon said on Friday. Jes Staley, head of the investment bank, also said his boss should stay “for many years to come”.
The fiasco in the London trading operation that produced $5.8bn in losses sparked some calls for Mr Dimon’s resignation but absent a dramatic worsening of that situation, he is likely to stay put.
That gives a long “runway”, say insiders, to a younger generation of potential contenders: Mike Cavanagh and Daniel Pinto, the new co-chief executives of the expanded investment bank, and Matt Zames, now co-chief operating officer.
Mr Staley, on the other hand, is now officially out of the running. Only a year younger than the 56-year-old Mr Dimon, he recalled that in 2009 when he was promoted to run the investment bank: “I said, ‘Three years from now if I’m not in Jamie’s seat, it is time to let the next generation get in line.’ I’m older than the furniture here.”
Stepping aside from day-to-day management of the investment bank, Mr Staley will deal more with clients and work on the strategic answers to the raft of regulatory and technological challenges facing Wall Street.
“I’m not sure I’ve ever seen a time when the issues facing the bank and how it may change the architecture of the institution are as significant,” Mr Staley said.
For all the talk of banks getting smaller – given fresh legs this week by the intervention of Sandy Weill, Citigroup’s former chief executive – the restructuring behind the management changes at JPMorgan is a bet on scale, according to several of the bank’s executives.
“The drumbeat of the Sandy Weills can’t be ignored,” said Mr Staley, but added: “What’s tragic about it is perhaps one of the only bulwarks against the financial crisis, aside from the heroic efforts of governments ... was diversification.”
“This institution has the greatest scale in its businesses out of any firm on Wall Street and I think that is incredibly powerful,” he said. “We are going to maximise that scale by putting the consumer businesses and the wholesale businesses under a unified command.”
Two new merged business lines come out of the change: a corporate and investment bank, run by Mr Pinto and Mr Cavanagh, and a consumer business that will swallow credit card and mortgage business lines, to be run by Gordon Smith, currently head of the credit card business.
“Global reach is important to have the scale to serve clients globally,” said Mr Pinto. Mr Cavanagh said of the new corporate and investment bank: “You’re talking about a very significant economic machine. It’s got a well-funded $350bn balance sheet.”
Analysts at Barclays said that by organising the bank around those two bigger business lines, Mr Dimon may actually “help fuel the speculation that some of the larger banks may look to more formally separate their consumer and investment banking operations”.
For all the talk of the future, the present gossip is on who is up and who is down. Mr Zames, “an exceptional talent”, according to Mr Dimon, gets more responsibility.
In an unusual structure, chief financial officer Doug Braunstein will now report to Mr Zames rather than Mr Dimon. Barry Zubrow, in charge of regulatory affairs, will also report to Mr Zames rather than the chief executive.
Frank Bisignano, who is currently working to put the mortgage business on an even keel after a barrage of regulatory action and lawsuits related to the financial crisis, will become co-chief operating officer. Mary Erdoes stays as head of asset management.
“All these folks are really great team players,” said Mr Dimon. Having been ousted from Citi by Mr Weill, Mr Dimon is looking for a smoother succession.
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