This week, it’s the Goldman Sachs Financial Services Conference. Vikram Pandit stood up on Tuesday and divulged Citi’s plans for an additional 4,500 redundancies. Yesterday was Jamie Dimon’s turn. Notably, Dimon didn’t disclose any additional redundancies at JPMorgan. However, he did use his presentationto make interesting statements about the structure and strategy of the bank. Here’s what you need to know.
1. There are some ‘opportunities’ that JPMorgan is unequivocally committed to exploring in future
We assume that jobs in these ‘opportunity’ areas are likely to be safe and that there may even be some hiring. These are the ‘opportunities’ JPMorgan will press ahead with regardless:
2. JPMorgan has been hiring avidly for its private bank
JPMorgan’s stock of international (ex-US) private banking client advisors has increased 20% in 2011. It’s also increased its global investment management salesforce by 13% this year. It takes two years for all these new hires to have a positive effect on the bottom line: private bankers hired in 2009-2011 won’t turn profitable until 2013.
3. The Global Corporate Bank has been, and will remain, a big growth area
This year, JPMorgan aims to hire 260 corporate bankers. It’s on track to achieve that. In five years’ time, it wants the global corporate bank to provide an additional $1bn in annual pre-tax income. However, future growth won’t come from theUS, nor Europe, norAustralasia. On the map below, future investment in the global corporate bank will occur in the countries coloured yellow (ie. Russia, China, India, Turkey, South Africa, Saudi Arabia and various places in South America).
4. Long term growth will come from advice, disintermediation, trading and derivatives
JPM thinks investment banking is a growth industry. It thinks higher revenues will come from: - Significant growth in ECM, DCM and advisory (we’re guessing this is expected as corporates turn to primary issuance as a means of raising funds, instead of seeking loans from banks – so called ‘disintermediation’); from increased demand for advisory services; from growth in derivatives markets. - Trading and derivatives. Central clearing will increase the size of the potential customer base, international capital flows will increase, and financial assets are expected to double in the next decade. Fixed income revenues at JPM have doubled since 2005. However, ‘poor outcomes’ on derivatives reform and the Volcker Rule could affect this sunny scenario adversely.
5. You should be working in electronic trading
Spreads on both fixed income and equity products have ‘decreased significantly’ over the past two decades, says JPM. Volumes haven’t. With revenues driven by volumes, trading is all about capturing flow. JPM has an ‘electronic build-out underway’ and plans to increase electronic trading revenues by 200% between now and 2015 (to $500m). Expect hiring.
6. JPMorgan has 2.4 people in technology and operations for every 1 person in sales, trading, or research
You have a significantly higher chance of getting a job in the middle and back office than becoming a salesperson, trader, or researcher. In total, JPMorgan has: - 2,500+ salespeople - 2,000+ traders - 800+ researchers - 13,000 control, operations and technology professionals It also has 16,000 investor clients, suggesting the average salesperson covers 6.4 customer accounts.
7. Excluding DVA, fourth quarter revenues at the investment bank have been ‘essentially flat’
This doesn’t seem great, given that – excluding DVA - fixed income revenues were down 14% year-on-year and equities revenues were down 15% year-on-year in the third quarter. The eurozone crisis still looms large, but significantly lower revenues look like more than a passing phase. This could bode badly for jobs in future.