A reversal of fortunes within the financial industry is illustrated in few places more vividly than JPMorgan Chase.
A few years ago, the company’s consumer bank, Chase, was struggling under the weight of the mortgage crisis and a slow economy while the JPMorgan investment bank thrived.
More recently, however, it was the head of the consumer bank, Gordon Smith, who was sounding upbeat and jocular as he spoke, with his English accent, about his growing business during a presentation at the company’s annual investor day, pointing to opportunities like the bank’s new mobile app and the improving credit of the American consumer.
A few hours earlier that same day, Daniel Pinto, the Argentine-born head of the company’s investment bank, was notably less cheery as he reviewed billions of dollars in cuts his division will be making and reductions in his future financial projections, even as his team has gained relative to competitors. It was not discussed during the investor day last week, but it is Smith who is in line to succeed Jamie Dimon should JPMorgan Chase need a new chief executive in the near future, according to company executives briefed on the matter who were not authorised to speak publicly.
In the past, the succession line at JPMorgan Chase was generally thought to run through the more complicated and, at the time, more profitable investment bank.
When it came time for Dimon to speak to the company’s investors, he joked about the unexpected nature of a situation in which it is the Wall Street power brokers who are on the back foot. “I tell Daniel and all the guys, all the folks from the investment bank, it’s really weird to feel sorry for the investment bank, isn’t it? You have to confess,” Dimon said, drawing a laugh from the audience.
The diverging prospects for JPMorgan’s biggest businesses reflect a split within the broader financial industry. Investors are betting that banks like Wells Fargo and US Bancorp, which focus primarily on American consumers, will grow much faster than firms like Goldman Sachs, which are concentrated on Wall Street business.