Up or uptown. So goes the old J.P. Morgan & Co. motto, describing the path executives would travel when they moved up, within the banks immediate ranks, or were shuffled uptown, from J.P. Morgans fast-paced investment banking headquarters on Wall Street to the white-shoe but sleepy private bank and asset management group on Park Avenue.
But theres a new way of doing things now. Late last month, JPMorgan Chase & Co. chief Jamie Dimon tapped Jes Staley, the former CEO of J.P. Morgan Asset Management, to run the banks lucrative investment banking business. Bill Winters, the former co-head who navigated the business through the recent credit crisis, is leaving the firm. Steve Black, the other investment banking co-head, was moved upstairs as executive chairman and plans to retire next year.
The shuffle positions Staley as one of a handful of possible successors to Dimon, whose brand has risen exponentially over the past year as he engineered the purchases of Bear, Stearns & Co. and Washington Mutual and who has been a favorite adviser to regulators and lawmakers as the credit crisis has unfolded.
The promotion makes Staley the clear No. 2, but given that he and Dimon are just a year apart in age, at 52 and 53, respectively, its less clear that he will ever ascend to the top spot. Theres been speculation that Dimon could be in line for a political appointment under an overhauled financial regulatory system, but he has said he plans to stay in his job for at least five more years.
Putting Staley in charge of investment banking will give him the experience he needs to move into the corner office. You have to run the investment bank if you want to run the bank itself, says one source close to the bank, which posted a record $16 billion in revenue in the first half of the year.
It may also help JPMorgan sidestep the Apple conundrum the problem that arises when a CEO becomes synonymous with a companys success. Dimon is coming perilously close to becoming the Steve Jobs of JPMorgan, and sources say he and the board want to raise the profile of other senior executives. Mary Callahan Erdoes, the 42-year-old rising star who heads the private bank, will replace Staley as CEO of the asset management business and emerges as a possible successor to Dimon. Others said to be in the running: CFO Michael Cavanagh and Charles Scharf, head of retail banking.
But the shuffle is risky. You have two businesses that are doing well, notes John McDonald, a research analyst who covers JPMorgan for New Yorkbased Sanford C. Bernstein & Co. To be sure, Staley himself says hes not planning a shake-up. I dont foresee making significant changes anytime soon, he tells II. The investment bank has been successful. Just like in the asset management business, I want to evolve the strategy and give it a sustainable advantage.
Asset management has been his recent focus, but Staley is no stranger to investment banking. He helped launch the banks equities business and by 1999 was running equity capital markets.
McDonald says Dimon made the right choice: Jes turned asset management into a meaningful business for JPMorgan. Hes a realistic candidate to someday run the bank.