For those if you who don’t know, it’s JPMorgan’s annual investor day. Starting at 8.30EST, its leading lights will be standing up and opining about the future of the bank. There with them will be Daniel Pinto and Mike Cavanagh, co-chief executives of the investment bank. Cavanagh and Pinto have yet to take their places on the podium, but their presentation has been released ahead of time.
If you work for JPMorgan, or aspire to work for JPMorgan, this is what you need to know.
1. It’s all about keeping a lid on costs
After paying $20bn of legal fines in 2013, JPMorgan held pay steady last year. Unfortunately, this may be the way of things for the foreseeable future. The bank plans to spend an additional $2bn on controls this year. In today’s strategy presentation, Cavanagh and Pinto highlight the following priorities. Summarized, they suggest cuts, regulatory spend and cost control.
2. JPMorgan is a top tier bank, in everything except cash equities
3. These are JPMorgan’s weak spots
4. JPMorgan’s corporate and investment bank looks over-staffed in Asia Pac…
The chart below is the most interesting of the entire presentation.
It shows that JPM generates average corporate and investment banking revenues per head of…$857k in the U.S., $933k in EMEA, $1.3m in Lat Am and just $280k in APAC.
It also shows that JPM has the highest ratio of front office bankers to ‘significant clients’ in APAC, at 6:1, compared to just 2.7:1 in EMEA and Latin America.
5. …but ‘international’ is where the growth is
JPMorgan seems to be expecting Asia to come through. It stresses that most of its growth is coming from outside the U.S.:
6. JPMorgan will be hiring for its equities business, and maybe for electronic trading too
7. Forget program trading and trading giant blocks of stock, JPMorgan is all about placing lots of very small trades
It’s all about flow. Most of JPMorgan’s trades are very small and enacted on behalf of clients (although it’s not entirely clear from the chart below whether JPM is actually using algorithms to break big trades into small blocks, in which case program trading would still be a big thing after all).
8. There are no more ‘bright line’ proprietary trading desks at JPMorgan, there may be some blurred line prop trading
JPMorgan says it’s put an end to all ‘bright line’ prop trading at the bank, but doesn’t define what this is. ‘Bright line prop trading’ is actually a term from the Volcker Rule, defined by law firm Davis Polk as trading that uses a banking entity’s own capital and that benefits from price movements, that’s solely organised to generate profits from price movements, that has no market making function or customer contact, and that pays a bit like a hedge fund.
In other words, JPMorgan does still have traders who engage in something similar to prop trading, but it’s only for the benefit of clients.
9. Revenues per head are far higher in FICC than anywhere else in the business
JPMorgan’s FICC bankers far outweigh everyone else when it comes to revenues. It’s not clear what happens to their superiority when the cost of capital is factored in, however…