JPMorgan Chase is to announce a shake-up of its securities business this week after a slump in trading revenues flattened investment banking profits two weeks ago.
Chief executive Jamie Dimon held a conference call with the bank's managing directors on Thursday in which he expressed his disappointment with the securities division's performance and proposed changes in its leadership.
Dimon has decided to simplify the securities business' management by picking four global product heads. Patrik Edsparr will become head of rates, Donald McCree head of credit, Carlos Hernandez head of equities and David Puth head of currencies, commodities and emerging markets. The present structure employs multiple regional heads.
Bill Winters and Steve Black, co-heads of the investment bank, will retain their positions but others including John Corrie, head of equities for Europe, the Middle East and Africa, and Fawzi Kyriakos-Saad, head of European credit and rates, will move. JPMorgan is understood to wish to retain Corrie in a role at the bank but Kyriakos-Saad is leaving. He is considering establishing up a hedge fund with JPMorgan support and investment. Hedge funds London Diversified and Blue Crest were set up with JPMorgan capital.
The changes were prompted by JPMorgan's full-year results, which showed group net income up 62%, while earnings at the investment bank were flat after trading revenues fell 18%. Dimon said at the time: "There were some large trades that went sour in past quarters and those won't be repeated."
It remains unclear how the restructuring will affect staff lower down the hierarchy. One JPMorgan banker said: "This is just the tip of the iceberg - watch this space. It will take a little while to filter down but, if you're a middle-ranking managing director, you've got to be curious about what on earth is going on." The banker added that, despite rumours to the contrary, Winters remained in the ascendancy at the bank. "He has completely ingratiated himself with Dimon," he said.
Dimon is thought to have been considering the future of the investment bank in Europe since he took over as chief executive in January 2004 following the merger of JPMorgan with Bank One. Dimon, who is based in New York, travelled to London last summer to appraise the European business. Another JPMorgan banker said: "It remains unclear but there are questions about whether the business is getting more U.S.-centric." Three of the four product heads to be announced this week are based in the U.S.
The changes mirror events at the bank following the release of third-quarter results in 2004 when a 49% drop in fixed-income trading revenues undermined revenues. Many senior capital market bankers subsequently left.
In response to those results, the bank separated its risk-taking businesses in fixed income and put them under the control of a proven risk manager, Edsparr, who had been head of global proprietary trading. The origination businesses were grouped under Hernandez, who had previously run JPMorgan's equities business. As global head of the credit management group, a position outside the investment bank, McCree will bring experience of managing volatility.
A spokesman from JPMorgan declined to comment.