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Twelve things you need to know from J.P. Morgan’s investor day

It’s annual investor day at J.P. Morgan. There has been a corporate video (“It’s not just business, it really is doing good”), there hsa been a pep talk from Jamie Dimon (“I love this place”) and there has been a shouty preliminary presentation from Marianne Lake, J.P. Morgan’s new CFO. The speeches are ongoing as we write.

If you don’t want to look through the long investor day presentation and you don’t want to listen to the lengthy webinar that accompanies it, here’s the digested version of J.P. Morgan’s big day as far as it concerns the corporate and investment bank.

1. J.P. Morgan is making 17,000 redundancies across the bank

J.P. Morgan is intending to remove 17,000 of its employees (somewhat more than the 4,000 initially indicated in the presentation). If you work in the corporate and investment bank, the good news is that 15,000 of these cuts are expected to come from the mortgage business. However, corporate and investment bankers may not be spared entirely. J.P. Morgan said that it will be “optimizing” and seeking “cost synergies” in this area, suggesting middle and back office staff will go. It also said that it plans to “streamline” its coverage teams, which sounds like bad news for industry-focused M&A and capital markets bankers. And it wants to rationalize technology platforms.

2. J.P. Morgan will still be paying good bonuses

Forget Europe. Forget attempts to cap bonuses as a percentage of salaries. Forget paying people regardless of how well they perform – J.P. Morgan is all about paying for performance. In today’s presentations, the bank said that compensation in the investment bank will remain consistent and that one of its priorities is, “attracting the best talent” and, “maintaining pay for performance culture.”

3. J.P. Morgan will be investing in electronic trading 

Electronic trading is investment banks’ favourite area for investment. J.P. Morgan is no different. The bank said it continues to invest in equities electronic trading and that it’s building up its fixed income trading platform, including rates, FX and commodities.

As the chart below, taken from today’s presentation shows, J.P. Morgan is a little behind when it comes to equities electronic trading. Big equities electronic trading hires may be coming soon.

Equities low touch

4. J.P. Morgan will be investing in collateral management 

As new capital rules come into effect, collateral management is a big growth area. JPMorgan is investing accordingly. Collateral management is a growth area, where the bank launching ‘innovative solutions’, it said today.

5. J.P. Morgan has been investing in prime brokerage

J.P. Morgan wants to be a “top tier player” in prime brokerage in Europe and Asia. It’s ‘executed key hires’ in both regions and has achieved an 80% increase in its international prime brokerage revenues since 2010.

6. J.P. Morgan is spending a lot more on regulation 

Something nasty has happened to regulatory spending at J.P. Morgan’s corporate and investment bank since 2010. See the chart below. More regulatory spend means more control staff, which should be good news for anyone looking for jobs in compliance or product control.

Regulatory spend

7. J.P Morgan has been hiring commercial bankers

Commercial banking is a growth area for J.P.Morgan. The bank has hired ‘several hundred commercial bankers’ in the past year. It’s all about cross-selling said Jamie Dimon. The following chart illustrates the general idea. It also explains why investment bankers are paid so much more than bankers in other areas of banks.

The partnership between JPMorgan’s corporate bank and its investment bank has delivered a $2bn increase in revenues over the past two years, said Dimon.

Cross selling JPM

8. J.P. Morgan is investing outside the US

Like Goldman Sachs, J.P. Morgan’s emphasis is on growing its corporate and investment bank internationally. As the charts below show, 48% of JPMorgan’s CIB revenues are currently generated internationally and international revenues are growing at twice the rate of revenues in North America.

JPMorgan International clients

9. JPMorgan has an enormous number of people in India

J.P. Morgan said today that it has 12,000 employees in the whole of Europe the Middle East and Africa (EMEA) and another 8,800 employees in India alone. Many of its Indian employees work in data and service centres.

10. J.P. Morgan thinks big opportunities are coming in Europe

Also like Goldman Sachs, J.P. Morgan thinks Europe is a growth area for investment banking. Bank deleveraging in Europe will result in increased reliance on capital markets, said J.P. Morgan today. In other words, as fewer European banks make loans to European companies, companies will be compelled to raise money through the capital markets instead. European debt capital markets (DCM) bankers should be particularly hot.

11. Most of the recent growth in sales and trading revenues at J.P. Morgan has come from rates and commodities 

Rates trading has been a big driver of sales and trading revenues at J.P. Morgan since 2006. It may not last: the bank also said that rates business will be most heavily affected by regulatory changes in future.

Markets revenues

12. Only Citigroup’s corporate and investment bank is more efficient than J.P. Morgan’s

J.P. Morgan is efficient. Citigroup is even more efficient. Credit Suisse isn’t efficient at all. Michael Corbat can feel good. Brady Dougan can’t.

Cost efficiency

 

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