One silly thing to think about JPMorgan’s executive reshuffling announced today is “fuck you Sandy Weill!” Before today JPMorgan looked a bit like a loose confederation of financial services businesses, including in particular three different institutional units: the Global Corporate Bank, a bank that lends money to companies, the Investment Bank, an investment bank that does mergers and trades securities, and Treasury & Securities Services, which I think of as sort of a meta-bank that offers big companies checking accounts and safe deposit boxes but, like, bigger. Now all of those things are being combined into the Corporate & Investment Bank, irrevocably mixing corporate (good!) and investment (bad!) banking into one unholy mess seasoned liberally with credit default swaps. The combination will sadden anyone with any hopes of bringing back Glass-Steagall, but it’s paying dividends for JPMorgan already, as the C&IB “will be looking to our global leaders to help implement strategy and deliver top-line synergies, while optimizing the model across all functions in the regions,” a masterpiece of jargon that I doubt any of its businesses could have managed on their own.
“Top-line synergies” of course means that now when you open a cash management account with former TSS you get not a toaster but a meeting in which you’re pitched on a loan from the former corporate bank and a potential M&A deal opportunity with the former investment bank, and vice versa mutatis mutandis if you instead enter JPMorgan through the lending or advisory or trading doors. Because the goal is not merely for JPMorgan to do all of the financial-services functions that some people think should be separated from each other, but for JPMorgan to do all of those functions for all of the clients in the world, because some people just don’t worry that much about “too big to fail.” Read more »
Jefferies set aside $870 million in the first six months of its fiscal year, enough to pay its 3,809 employees an average of $228,407. Goldman Sachs set aside $225,789 for each of its 32,300 workers. Average pay for the 26,553 people in JPMorgan’s investment bank was $184,989, or at least 18 percent less than Jefferies’s and Goldman Sachs’s reported figures. It was 10 percent less than both in fiscal 2011…Goldman Sachs, run by Chief Executive Officer Lloyd C. Blankfein, 57, includes consultants and temporary staff when reporting headcount. Jefferies, which has been luring talent from larger rivals to expand in the wake of 2008’s credit crisis, tallies only full-time workers in its disclosures. Jefferies’s reported headcount would expand by 10 percent to 15 percent if the firm included temporary workers, said a person with direct knowledge of the figures who requested anonymity because the information isn’t public. While that would place the firm’s average pay per employee below Goldman Sachs’s, it still exceeds JPMorgan’s and Morgan Stanley’s. [Bloomberg]
JPMorgan’s chief investment office has lost $5.8 billion on the trades so far, and that figure may grow by $1.7 billion in a worst-case scenario, Dimon, the bank’s chairman and chief executive officer, said today. [Bloomberg, related]
Update: And the winner is HHFM, with -$5.75 billion! Get in touch to collect your prize.
Did Bruno Iksil make the bank -$2 billion? -$9 billion? -$20 billion? Was this all just a hoax and he actually didn’t lose any money at all? JPMorgan will let us know tomorrow at 7AM. Read more »
“Many companies have transactions that go bad,” Greenberg said today on “In the Loop With Betty Liu” on Bloomberg Television. “Everybody’s not paraded down to Washington to testify.” “He handled it OK,” Greenberg said of Dimon, 56. “It was really outrageous to have the CEO come down and testify before Congress because of a transaction that didn’t work out well.” [Bloomberg, related]
One way you could spend this slow week is reading the “living wills” submitted by a bunch of banks telling regulators how to wind them up if they go under. Don’t, though: they’re about the most boring and least informative things imaginable and I am angry that I read them.* Here for instance is how JPMorgan would wind itself up if left to its own devices**:
(1) It would just file for bankruptcy and stiff its non-deposit creditors (at the holding company and then, if necessary, at the bank).
(2) If after stiffing its non-deposit creditors it didn’t have enough money to pay its depositors it would sell its highly attractive businesses in a competitive sale to willing buyers who would pay top dollar.
This seems wrong, no? And not just in the sense of “in my opinion that would be sort of difficult, what with people freaking out about JPMorgan going bankrupt and its highly attractive businesses having landing it in, um, bankruptcy.” It’s wrong in the sense that it’s the opposite of having a plan for dealing with banks being “too big to fail”: it’s premised on an assumption that the bank is not too big to fail. If JPMorgan runs into trouble that it can’t get out of without taxpayer support, it’ll just file for bankruptcy like anybody else. Depositors will be repaid (if they’re under FDIC limits); non-depositor creditors will be screwed just like they would be on a failure of Second Community Bank of Kenosha. Read more »
Despite Jamie Dimon’s promise that JPMorgan will be “solidly profitable” for the quarter, some are skeptical given the growing estimates of Whale-boy’s losses. According Mike Mayo, the bank “will only make $727 million…including $4 billion of losses in the unit that made the bungled bet [though] if the losses exceed $5 billion, JPMorgan could make an overall loss.” Barclays’ Jason Goldberg thinks things are gonna be okay here, and sees the bank making $3.3 billion, assuming you know who will have only lost it $3 billion when all is said and done. And yourselves? Read more »
JPMorgan disclosed on May 10 that it had a $2 billion trading loss because of riskier-than-expected credit securities. Omega sold about two-thirds of its position the next day, taking a loss: The shares tumbled 9 percent on May 11, closing at $36.96. They traded at $36.78 yesterday. At Omega’s staff meeting in May, one of the portfolio managers suggests that JPMorgan shares may now be ridiculously cheap. Cooperman launches into a tirade about how Dimon has been unfairly pilloried by Representative Barney Frank and other critics. “I’m incensed by some of the sh– you’re reading,” Cooperman tells his managers. He says he’ll hold on to his remaining shares as a vote of confidence in Dimon. [Bloomberg Markets]
J.P. Morgan has added at least five new employees over the past month to the risk department in its Chief Investment Office, the unit responsible for trading losses that may have climbed to $9 billion, according to people familiar with the matter. The bank is expanding the risk unit as it responds to the trading debacle and rebuilds the CIO, said one person familiar with the bank’s thinking. [FINS]
Saba Capital Management’s Boaz Weinstein recently exited a now famous and profitable credit derivative bet against JPMorgan, according to sources familiar with the trade. In May, JPMorgan reported a $2 billion trading loss in its chief investment office, due to large bets on an obscure group of indexes that track the performance of corporate bonds, including the Markit CDX NA IG Series 9 index. Weinstein’s Saba, among other funds, bet against that trade. Saba, which has liquidated its position in its entirety, “exited directly to JPMorgan’s CIO office,” according to a source familiar with the hedge fund. Weinstein, a former Deutsche Bank trader, was one of the early proponents of a trade that involved buying Investment Grade Series 9 10-Year Index CDS, discussing it at the Harbor Investment Conference in February. Ironically, the conference was held at JP Morgan’s Madison’ Avenue offices. [Reuters]