After Crisis, Show of Power From Dimon and JPMorgan
Jamie Dimon is not the modern-day John Pierpont Morgan. He is not the new king of Wall Street, and he’s certainly not President Obama’s B.B.F. (best banker friend).
At least, that’s what he will tell you over lunch at the Park Avenue headquarters of JPMorgan Chase , the descendant of the House of Morgan that came through the global financial crisis bigger, stronger and healthier than its rivals.
But taking a victory lap, or even basking in the adulation he has received while his fellow bank chiefs have been pounded, is the last thing Mr. Dimon claims to want. He knows all too well the dangers of swaggering in the footsteps of former Wall Street kings like Sanford I. Weill, his onetime mentor who helped build Citigroup , which grew so unwieldy it nearly went bankrupt, or Lloyd C. Blankfein, the Goldman Sachs chief whose crown has been tarnished by accusations of double-dealing under his watch.
Instead, Mr. Dimon worries openly that new financial regulations, which are expected to be passed by the Senate on Thursday and signed by President Obama shortly thereafter, will cost his bank billions and that the jittery economy could suffer another setback. And that rivals, lurking in every corner of the world, are devising new ways to “clean our clocks.”
In fact, in the lunchtime interview, his outlook was so cautious, his tone so subdued, that it prompted a senior aide to gently interrupt: “Jamie, how about mentioning a few of our positives, too?”
For all the talk of gloom and doom, the postcrisis era looks brighter than Mr. Dimon is willing to acknowledge. In Washington, the financial industry was largely successful in blunting the toughest legislative proposals. On Wall Street, the deluge of losses is slowing, and ultra-low interest rates are helping all banks mint money.
JPMorgan, in particular, is poised to increase its profit and gain market share in several businesses as many of its competitors continue to struggle to get back on their feet.
The crisis cemented Mr. Dimon’s reputation as a financial superstar — a brazen dealmaker who buys when others are selling, a strict risk manager who resisted the type of exotic businesses that felled others, and a charismatic leader who charms congressmen and credit traders alike. He is now commonly referred to by a single name, like Pelé or Madonna.
“Right now, there are virtually no giants on Wall Street except maybe Jamie,” said David M. Rubenstein, a founder of the Carlyle Group and a longtime financial and political hand.
Mr. Dimon earned that distinction by playing as much defense as offense during the housing boom, which insulated JPMorgan more than most when the boom went bust. Then, when the bust became a full-blown financial crisis, Mr. Dimon went hunting for bargains, significantly expanding his position in investment and retail banking while others were shrinking.
Now, those efforts are paying off. Even with a slowdown in trading, analysts are forecasting a profit of 70 cents a share when JPMorgan reports its second-quarter earnings on Thursday, about the same as a year ago.
Of course, at age 54, Mr. Dimon has only just begun trying to build the kind of global banking empire he initially set out to create with Mr. Weill at Citigroup. While JPMorgan’s share price fared better than most of the banking sector through the turbulence of the last few years, at around $40.30 it remains at roughly the same place it was when Mr. Dimon took over as chief executive in December 2005.
And analysts point out that while JPMorgan’s overall operation is in better shape than most, the bank does not enjoy a top position in any single business.
“They are not Wells Fargo when it comes to retail banking. They are not American Express when it comes to credit cards. They are not BlackRock when it comes to asset management,” said Michael Mayo of Credit Agricole Securities. “And JPMorgan is not Goldman Sachs in emerging markets.”
Mr. Dimon is trying to make up that lost ground. Over the last three years, he has plowed more than $10 billion into his main businesses. He recently announced plans to build up his corporate bank and make an aggressive push into Brazil, China and a dozen or so other emerging markets that are growing at a faster pace than developed economies. That would put him toe to toe with banks like Citigroup, HSBC and Standard Charter that have been in these markets for decades.
“We are prepared, and we are already good at it,” says Mr. Dimon, ever confident but also careful not to overpromise. (He notes the plan will unfold over several years.)
It is an approach right out of the Dimon playbook, mixing competitive paranoia with hardball deal-making and careful management of investor expectations. He made a name for himself as Mr. Weill’s young operations whiz, helping assemble Citigroup in the late 1990s through a series of flashy mergers. After arriving at Bank One in 2000, he spent the next few years fixing the ailing regional lender. Then, after Bank One’s merger with JPMorgan in 2004, he orchestrated a similar turnaround.
He spent three years stitching together the banks’ disparate computer systems and getting a handle on the financial risks lurking on its balance sheet. Every step of the way, he told investors that he was focused not on lifting quarterly profits but on building a strong company for the long haul. Mr. Dimon has refined that formula in recent years, seizing more than a few opportunities to reposition his bank while his rivals were in deep distress.
His relationship with the President
With his purchase of the teetering Bear Stearns — subsidized by taxpayers and steeply discounted at $10 a share — Mr. Dimon filled in crucial gaps in his investment bank. Where JPMorgan had traditionally been a big bond house, the addition of Bear kick-started its stock and commodities trading operations and added a lucrative prime brokerage business, which provides financing to hedge funds, that had been high on his wish list.
He took Washington Mutual off the government’s hands for a mere $1.9 billion, giving his retail bank a giant share of the nation’s deposits and turning it, overnight, into a major player in California. (It helped, of course, that nobody else entered a bid.)
As panic gripped the financial industry, consumers and big corporations saw JPMorgan as a safe place to park their cash, even if it meant accepting a savings rate close to zero percent. With few competitors free to lend, JPMorgan’s bankers demanded big premiums from corporate borrowers to finance deals.
While rivals were retrenching during the crisis, Mr. Dimon ordered his lieutenants to expand. Although they shuttered scores of Washington Mutual branches, Chase opened more than 300 new retail locations over the last three years and added about 3,000 bankers to its ranks. One of every 13 bank branches opened since 2009 has been a Chase branch, according to SNL Financial.
Chase Card Services, meanwhile, has introduced three new types of credit cards in the last year. In the second quarter alone, it mailed out an estimated 164 million applications, according to data from Synovate, a research firm. That was more than twice the number sent out by American Express, the next most active issuer, and made up nearly one-third of the industry’s total mailings.
When the head of the credit card division offered to scale back as losses spiraled, Mr. Dimon was emphatically opposed. “We don’t want to do stupid things because we are losing a lot of money,” Mr. Dimon said, anticipating a rebound in the card business. “Hell no. We are going to do the right thing as fast as we can.”
Mr. Dimon was aggressive in dealing with Washington, too. Whereas the heads of Citigroup and Bank of America struck a conciliatory tone with policy makers, Mr. Dimon was downright confrontational. JPMorgan’s 22-person Washington office was spending more than $7.7 million on lobbying over the last five quarters, more than any other bank, according to the Center for Public Integrity.
Meanwhile, in speeches and in private meetings with lawmakers, he griped about credit card legislation, protested a proposed bank tax and complained that JPMorgan — which, he reminded them, accepted bailout funds with reluctance — was being unfairly punished for the sins of its competitors.
The result? A sweeping financial reform bill that most analysts say will not fundamentally change the way the industry does business. Many of the harshest measures were significantly watered down or delayed. JPMorgan, for example, will be allowed to retain its giant hedge fund unit, Highbridge Capital Management, and its status as a derivatives powerhouse.
Despite his semi-victory, Mr. Dimon says being the chief is less fun these days, now that politics are so intertwined with his job.
Mr. Dimon insists that the closeness of his relationship with President Obama has been “greatly exaggerated,” as was the portrayal of any fallout with the White House. Still, he remains adamant that Washington’s “indiscriminate vilification” of all banks was wrong.
“What I object to is the blanketing blame,” he said. “I think it is not accurate and leads to bad policy.”