Banking’s a funny old game. At the beginning of April, JPMorgan seemed to be coasting through another comfortable season as industry leader.
Chairman and chief executive Jamie Dimon shared his thoughts on life in a letter to shareholders on April 7 that ran to an impressive 66 pages, complete with many league tables featuring JPMorgan at the top.
On April 14, Dimon and chief financial officer Jennifer Piepszak announced first-quarter results that were also strong. Investment banking fees of $3 billion set a new quarterly record, helped by equity underwriting and JPMorgan’s number-one ranking in leveraged finance.
But overconfidence may have set in.
April also saw fallout from the Deliveroo IPO, as a deal launched on March 31 slumped in price, with lead managers JPMorgan and Goldman Sachs taking much of the blame for what was dubbed “the worst IPO in London’s history”.
And later in the month, JPMorgan took sole charge of the proposed €4 billion financing of a planned European Super League of top football clubs.
This proposal managed the remarkable feat of uniting virtually all consumers of the product – football fans – along with most of the producers, in the form of players and managers, in opposition.
Politicians were quick to sense the mood and joined in condemnation of the plan, which collapsed in acrimony within days.
Temptation
It seems that some JPMorgan bankers had failed to digest the thoughts of chairman and Zen banking master Dimon.
“A bad decision-making process kills. If necessary, review the information over and over – often the answer is simply waiting to be found – and if you don’t have to, don’t rush,” Dimon advised in his letter.
How true!
The bankers instead seem to have been tempted by hefty rates that were expected to be 2% or 3% on a complex financing package secured by football broadcasting rights, while failing to assess the reputational risk of being the sole bank associated with a hugely unpopular deal.
April may be the cruellest month, as noted football lover and former Lloyds Bank employee TS Eliot once observed
Manchester United executive vice-chair Ed Woodward, who once worked for JPMorgan, may have been instrumental in bringing his former colleagues on board to finance the planned deal, though JPMorgan declined to comment on the details of discussions.
Woodward, who is blamed by many fans for the relative sporting failure of Manchester United since the retirement of manager Alex Ferguson in 2013, saw his own departure from the club announced as soon as the proposed new European league of super teams fell through.
The plan may have collapsed quickly enough to avoid causing any lasting reputational issues for JPMorgan.
After it imploded, a JPMorgan spokesperson conceded: “We clearly misjudged how this deal would be viewed by the wider football community and how it might impact them in the future. We will learn from this.”
In context
And a couple of problematic deals – only one of which was completed – should be placed in context a month after JPMorgan managed to sidestep the collapse of Archegos, which caused billions of dollars of actual cumulative losses for rivals, including Credit Suisse, Nomura, UBS and Morgan Stanley.
JPMorgan’s chief risk officer Ashley Bacon is certainly unlikely to suffer any fallout from the failed football league plan, though as one of the few Europeans on the bank’s operating committee he might have been able to pitch in with a view on the likely reception for the proposal – if anyone asked him.
The bankers who narrowly avoided the reputational own goal of financing the European Super League should nevertheless take time to reread the words of their wise veteran manager Dimon.
“When I hear examples of people doing something that is wrong because they could be paid more, it makes my blood boil – and I don’t want them working here,” Dimon said in his shareholder letter.
April may be the cruellest month, as noted football lover and former Lloyds Bank employee TS Eliot once observed. JPMorgan bankers in London will no doubt be hoping that the rest of the year goes more smoothly.
