Is it still safe to work for JPMorgan?
We have been big cheerleaders for JPMorgan in recent years. For example, we've pointed out that JPM is indisputably a top tier bank, in all product areas. We've said that JPMorgan traders are the most talented in the world. And we've said that JPMorgan is a very safe place to work.
Now, however, JPMorgan's star is looking a little less twinkly. As we pointed out last month, results to this year's Universum student survey show that business students globally are less keen on working for the US bank than they used to be. Are business students a leading indicator? We don't know. But this is why you might want to eschew the house of Dimon - and conversely, why JPMorgan is still great.
Reasons why JPMorgan may be unsafe
The main reason why you might want to avoid JPMorgan is clearly litigation. Quartz has a good list of all JPM's misdemeanors here. The bank is now facing up to $11bn in combined penalties and so-called 'consumer relief.'
This is nasty. A few weeks ago, Goldman Sachs analysts pointed out that JPMorgan's litigation reserve was $3bn. In other words, it's $8bn short.
Where will the extra money come from? No one knows. JPM is still trying to negotiate the fines down. However, $11bn in fines could yet turn out to be a floor rather than a ceiling. New scandals are emerging and JPM may be subject to criminal charges regarding the sale of mortgage backed securities between 2005 and 2007. This could drive the settlement even higher.
JPMorgan is Jamie Dimon's baby. Since joining JPM when it acquired Bank One in 2004, Dimon has steered it through the financial crisis. He has overseen the incorporation of Bear Stearns and Washington Mutual. And he has seen off internal competitors like Bill Winters who might have challenged him for the chief executive position.
However, as Felix Salmon at Reuters pointed out last week, Dimon now looks a little exposed. Bob Diamond, the ex-chief executive of Barclays resigned over a mere $450m fine. Dimon is hanging on in the face of a fine more than 20 times as big, and there's no one obvious to replace him.
If Dimon goes the way of Diamond, what happens next? Will JPMorgan's investment bankers and traders be led by the U.S. equivalent of Antony Jenkins - the fairly drab new head of Barclays? If a Jenkins-like CEO replaces Jamie Dimon, will JPMorgan's appetite for risk be reduced? So far, JPMorgan's bank has proven immune to redundancies, but this could change.
Reasons why JPMorgan is still great
1. JPMorgan's traders are still some of the best around
On the other hand - forget litigation risk, JPMorgan's traders are still looking good. Whilst rival banks have been making bad noises about their poor performance in fixed income during the third quarter JPMorgan has ridden out the market rout. During a presentation at the Barclays banking conference in early September, CFO Marianne Lake said JPMorgan's corporate and investment bank experienced flat markets revenues excluding DVA in the third quarter versus the same period of 2012. This looks a lot better than the 88% drop in FICC revenues at Jefferies over the same period.
2. JPMorgan's investment bankers are the best in the world
JPMorgan's investment bankers are also able persons. Recent figures from Dealogic, the data provider, show that JPM had an 8.8% revenues share in year to date 2013, versus 7.4% for Bank of America Merrill Lynch and just 6.5% for Goldman Sachs respectively.
So, is it still a good idea to work for JPM, we leave it for you to decide....