At the IMF meeting in Prague last year, the car carrying JP Morgan chairman Sandy Warner and the bank’s president and CEO, Bill Harrison, got caught in the crossfire of anti-globalization protesters. The driver managed to get out of trouble and both men escaped unscathed. But JP Morgan employees joked that, had Warner and Harrison really been in a tight spot, security would have been briefed about who to cover first. Just 10 months after Chase’s merger with JPMorgan it was clear that Harrison was firmly in the driving seat.
| Sandy Warner | ||||||
So news that Warner is standing down at the end of the year has not surprised Wall Street. Since Warner sold his investment bank to Chase in 2000, he has largely been a passenger with no operational responsibilities. It was only a matter of time before he made way for Harrison, his senior by three years. Harrison now becomes chairman as well.
“With my assignment completed, it seems appropriate on the first anniversary of last September’s merger announcement to set out on the next phase of my career,” says Warner. But observers suspect he was nudged out. “JPMorgan is under massive cost pressure and it can’t afford to have people sitting around doing nothing and getting paid $6 million dollars for it,” says one analyst.
Others say Warner is keen to pursue an alternative career, possibly in the SEC or US Treasury. “If the merger had progressed more smoothly then it’s likely he would have stuck around for the victory lap,” says one analyst in New York. But the fact is, Warner’s decision to end the ride here coincides with some very bumpy terrain for the bank.
It is trying to integrate on the back of very difficult market conditions. Like rivals, it has been shedding staff to reduce its cost base. Out of its 100,000 employees, 4,300 were made redundant in the first half of the year and more firings are expected. Geoff Boisi, co-head of the investment-banking division, left a voicemail message for his 30,000 staff saying there would soon be 10% fewer of them.
Senior executives have also left. The resignation of Ramon de Oliveira, head of asset management and private banking, was seen as a sign of his disappointment at Chase’s dominance. He was followed by Clayton Rose, COO of the investment bank; Joseph Walker, co-head of M&A; and recently Nick Rohatyn, co-head of internet operations.
In fact there are only two JPMorganers still in senior positions: Tom Ketchum runs the technology division and Walter Gubert heads investment banking in Europe.
JPMorgan also has credit problems, unlike the majority of its peers. According to one analyst these will “trash the rest of the year” for it. Also the bank has $10 billion of venture capital commitments of which around a third is known to have been invested in 1999 and 2000, at the height of the market. “They knew they were taking a risk but the degree of deterioration of their portfolio shocked everyone,” says an analyst.
Warner can hardly be blamed for slipping out of the back door at the end of a year that is certain to be deemed a failure for the merger.
