When Jennifer Piepszak and Troy Rohrbaugh stood up to present at JPMorgan’s investor day in May 2024, they had a good story to tell. As the recently appointed co-CEOs of the bank’s expanded commercial and investment bank (CIB), they were able to present a business that is by almost any measure at the very top of its game. It had a spectacular 2023, and all the more so for the fact that the underlying climate in much of investment banking was far from spectacular. And the franchise’s reorganization at the start of 2024 has placed it even more strongly for the future.
In January, JPMorgan CEO Jamie Dimon reshuffled his senior management in a process that also saw the corporate and investment bank expand to include the commercial banking division, in a bid to integrate more fully coverage of clients of all sizes.
Piepszak, the former co-head of JPMorgan’s consumer and community bank division, was appointed co-CEO of the new CIB alongside Rohrbaugh, the former co-head of the bank’s markets and securities services unit.
The two took over the day-to-day management of the CIB from Daniel Pinto, the firm’s long-serving chief operating officer who had run the division for 10 years.
Shortlisted
- Goldman Sachs
- Morgan Stanley
Piepszak and Rohrbaugh set about installing leaders below them, but there were to be more changes soon after, prompted by the departure of global investment banking head Viswas Raghavan, who was moving to Citi to run its global banking division.
When the dust finally settled, Doug Petno, former head of JPMorgan’s commercial bank, had been appointed as co-head of global banking alongside Filippo Gori, former head of Asia. Jason Sippel and Pranav Thakur were appointed to run markets, Takis Georgakopoulos continued to run global payments, and Tim Fitzgerald remained at the top of securities services.
While the changes looked eye-catching, the result is a division arguably better prepared for the future than before, and one more suited to the way in which the bank wants to approach its coverage of clients through their entire life cycle. What is beyond doubt is that the firm was already the dominant investment bank in 2023, making more money in investment banking and in secondary sales and trading than any of its peers.
In 2023, the corporate and investment bank (as it was then) posted revenues of about $49 billion, up slightly from the previous year, although still off the pandemic highs, while much activity remained depressed in a high interest rate environment. But the increase over 2019 is now substantial, at 24% for the whole unit, 33% for the markets business and fully 59% for payments.
Only investment banking remains at lower levels, down 13% from 2019.
The CIB division posted a return on equity of 13% in 2023, down from the extraordinary 25% seen in 2021, but still impressive in the context of the industry.
A host of number ones
Although investment banking activity has been depressed across the industry in 2023 – global M&A volumes fell 27%, debt capital markets issuance was practically flat and equity capital markets rose only 5% from a poor year in 2022 – the period was still a triumphant one for JPMorgan. The bank was on each of the biggest M&A, equity and debt transactions to be completed in the period and notched up a host of number one rankings.
It did all that amid a rapidly shifting backdrop. The largest and fastest rise in interest rates for a generation in many countries around the world played havoc with the investment plans of clients, institutional but particularly corporate, especially in rate-sensitive and highly leveraged sectors. In that environment, the instruction that trickled down from the top of the firm to JPMorgan’s army of bankers was to stay close to clients. Importantly, they were not to predict some version of an average outcome, but to prepare clients for a whole range of possibilities.
Even that range of possibilities likely did not include the full-blown regional banking crisis that blew up in March 2023, an event that saw a firm like JPMorgan bring its entire firm-wide resources to bear. Not only was it called upon to acquire an institution, but was also of critical importance in advising those institutions affected by the crisis and their clients.
“2023 showed why you need to be ready for the unexpected and underscored the importance of strong relationships in banking,” says Petno.
Particularly striking was the contrast between extreme macroeconomic and geopolitical challenges on one side and, on the other, a dynamic in some sectors – such as technology, and especially chipmaking – that resulted in equity markets behaving quite counterintuitively.
2023 showed why you need to be ready for the unexpected and underscored the importance of strong relationships in banking
Doug Petno, JPMorgan
“2023 was a year marked by considerable uncertainty, with a persistent inflationary environment and change in the monetary cycle,” says Sippel. “But in a way that I think confounded most clients, we wound up in a risk-on environment in spite of it all.
“I think it was a period where you could easily be wrong-footed, and so having JPMorgan there as an adviser, capital and liquidity provider was important.”
It was a tricky period to navigate for capital markets participants. For the most part, valuations that had prevailed in 2021 and to an extent in 2022 were not achievable for much of 2023, meaning boardrooms had to learn to accept reality. After the glut of activity in 2021, one of the most difficult tasks for an adviser since then has been to manage expectations.
“Last year was a time when it was difficult to reconcile the bid-offer between where the issuers thought they could issue and where the investors wanted to get paid,” says Gori, who also serves as CEO of Europe, Middle East and Africa for the CIB. “It was also the worst year in the last decade or so from a wallet standpoint when it came to investment banking activity, which was a reflection of all the complications that markets went through.”
No rest
In such an environment, what did success in global investment banking look like? Not for the first time, it looked a lot like JPMorgan.
In Dealogic’s rankings for investment banking fees, the bank was in number one position in equity, bond issuance and syndicated loans, and in second place in completed M&A. In every one of those rankings the bank increased its share of wallet from the previous year, and it ranked number one overall with an 8.8% share, up from 7.8% in 2022.
That was reflected in reported earnings too, with the bank reporting revenues of $6.58 billion from advisory, ECM and DCM in 2023. The result returned it to the number one position that it had relinquished to Goldman Sachs in 2021 and 2022 – in what is increasingly a two-bank field that is largely driven by Goldman’s advisory franchise and JPMorgan’s DCM business.
Petno is alive to the dangers that come with dominance. It is obvious that he and his colleagues recognise the need not rest of the firm’s laurels.
“That moniker of being number one can be a curse in many ways, because it can make you believe that you are already where you need to be,” he says. “Complacency can be the biggest obstacle we face – retaining that hunger you have as an underdog and really focusing on delivering more value to our clients and empowering our teams, that’s what Filippo and I are really focused on.”
He also stresses that the bank is well aware of where it is not yet number one, even if it is a little reticent to share its analysis with the outside world in any real detail. At the bank’s May 2024 investor day, Gori put up a slide with an unlabelled matrix of three products and 28 sub-sectors indicating where the bank considered itself to be ranked in the 2019 to 2023 period. Of the 84 separate segments, the bank said it did not rank first in 48, or 57%. It ranked second or third in 40% and fourth or lower in 17%.
That detail is lost in the broader picture, though, which remains formidable. In the bookrunner rankings for global DCM issuance volumes, JPMorgan continued with its usual number-one position. In completed M&A, the bank again ranked second behind Goldman Sachs, but it increased its market share by more than three points to reach 26.2%. Its deal volumes fell by 17%, but that was a better outcome than the industry decline of 27%.
In global ECM volumes, the bank ranked joint second, and its 48% increase was considerably ahead of the 5% rise in the overall industry. In terms of year-on-year change in deal volumes, the bank outperformed the market across the board in ECM, in all regions except EMEA in M&A, and outperformed in EMEA in DCM.
Showcase deals
With a deal roster the size of JPMorgan’s, the bank is inevitably on a vast number of the critical deals in any time period and in practically any market. While it was not a vintage year for M&A volumes across the industry, JPMorgan was on many of the most important deals, including the very biggest – the $98 billion acquisition of VMware by Broadcom, which was being sold by Silver Lake. JPMorgan was one of two lead advisers to the target.
Others showcasing its global franchise were its mandate to advise HDFC Bank in India on its $69 billion acquisition of Housing Development Finance Corp and advising cosmetics firm Kenvue on its spin-off from Johnson & Johnson. It also advised Horizon Therapeutics on its $28 billion acquisition by Amgen, and Societe Generale subsidiary ALD on its $20 billion acquisition of Dutch vehicle-leasing company LeasePlan, sold by TDR Capital.
Complicated cross-border transactions are one of the strengths of this firm
Filippo Gori, JPMorgan
Its DCM credentials include being a lead on the biggest deal of all, the $31 billion eight-tranche monster for Pfizer in May 2023. It was also on three of the next four biggest corporate deals, for Intel ($11 billion), Meta Platforms ($8.5 billion) and Kenvue ($7.75 billion).
JPMorgan’s sovereign and supranational business was represented by deals including the largest government bond in the period, the $14 billion-equivalent euro 10-year for Spain in January 2023, as well as a $10 billion three-trancher for Saudi Arabia, a $7.4 billion-equivalent 10-year for Belgium and a smattering of deals for the European Union.
In ECM, its highlights included the three very biggest globally: a $9 billion follow-on sale of shares in Japan Post Bank; the $5.2 billion IPO of Arm, the UK chipmaker whose decision to list on Nasdaq became emblematic of the diminishing importance of London as a primary equity market; and the $4.3 billion New York IPO of Kenvue.
Gori, who was JPMorgan’s Asia Pacific CEO before taking on his new role and is still in the process of moving from Hong Kong to London, is particularly fond of the Arm IPO – where the bank was one of four lead bookrunners and was the stabilizing agent. It was not a straightforward transaction, being the US listing of a UK company by Japanese investor SoftBank, and he thinks it is an example of the kind of deal that shows JPMorgan at its very best.
“This is the kind of deal that you work on for years, and where you need to work hard to bring together the various stakeholders to achieve an agreed outcome,” he says. “Complicated cross-border transactions are one of the strengths of this firm.”
Top spot
The biggest part of JPMorgan’s investment bank is its markets franchise. Its $28 billion of revenues in 2023 accounted for nearly 60% of the corporate and investment bank’s total revenues, some 18% of JPMorgan’s entire group revenues, and puts it firmly in first place among its global banking peers. It is fully 2.7 percentage points clear of Goldman and increased its overall share in 2023 by 60 basis points.
JPMorgan’s fixed income sales and trading business brought in $18.8 billion in 2023, up 1% from the previous year, and sees the bank retain the top spot it has enjoyed for years. Equities fell 13% from a very strong previous year, to about $9 billion.
We had to step in and look at the regional bank portfolios and help some of them manage their balance sheets lower
Pranav Thakur, JPMorgan
The bank’s fixed income share has remained quite flat between 2019 and 2023, but that conceals some dynamics within the overall picture. Over that period, the bank has lost some share in rates and commodities but gained in securitized products, for instance.
For Sippel and Thakur, four areas in particular stand out as opportunities that the bank was able to capture in 2023 – some planned, others less so. The regional banking crisis in the US offered an unusual source of new business as firms like JPMorgan stepped in to fill vacuums left by constrained smaller institutions.
Frontier markets in Africa and Latin America were another source of incremental growth in 2023 for the bank, as was market-making in European government bonds. The bank’s commodities business, and energy in particular, also improved.
As in the past, the 2023 regional banking crisis in the US saw authorities turn to JPMorgan as an acquirer, handing it the tottering First Republic Bank. The firm was also among those advising the regional banks on the surgery that would be needed on their balance sheets, but a less-noticed element externally was the way in which the markets franchises were also handling activity that regional banks had been forced to scale back for lack of available liquidity.
“We had to step in and look at the regional bank portfolios and help some of them manage their balance sheets lower but, because they had stepped away from the market, there was also a lot of client business that had to be done,” says Thakur. “So, the opportunity in the US was larger than usual.”
Building market share in markets
At JPMorgan’s 2024 investor day, commercial and investment bank co-chief executive Troy Rohrbaugh was candid about the performance of the markets franchise, noting that the bank’s market share in fixed income, currencies and commodities (FICC) was lower than it was before the coronavirus pandemic – even though the bank remains the market share leader – and JPMorgan is not number one in equities.
But revenues are not the whole story.
“While total revenues are what we’re measured against, equally important to us is client market share, because regardless of macro conditions, clients underpin our long-term strategy,” Rohrbaugh told investors. “From this lens, we’ve gained in all segments.”
Equities deserves a closer look too. The bank was second to Goldman Sachs, after having been top in 2022. But go further back and JPMorgan was in fifth place. The 2022 number was an unusual outperformance and something of a spike.
And bankers at the firm are adamant that there was no complacency at the end of 2022, but see the performance since then as simply a reminder of how it is constantly assaulted from all sides by the competition – be it from the traditional big investment banks or, more likely today, the electronic retail shops and the huge non-bank players such as Citadel Securities and Jane Street.
But to stay relevant, the bank knows it must nonetheless respond – and it has. “We have done a lot to upgrade in a few areas,” says co-head of the markets business, Jason Sippel. “On the equities side, one example is around our financing businesses, where we have meaningfully increased the scale of our financing businesses. We’ve also made some additional investments in our derivative-trading businesses in areas such as automated trading and execution technology for our clients.”
In credit, JPMorgan has been adding resources in high yield and loans trading, as well as distressed. It has also materially increased the size of its own direct lending business, with what bankers describe as meaningful balances now deployed.
Perhaps most importantly, it has been making big investments in electronic trading, ranging from productivity tools that result in light-touch automated services, where there is some trader intervention, all the way to fully automated solutions.
For Sippel, that period was perhaps the most intense of the year.
“The distinguishing feature of the regional banking crisis was how much structured finance was on some of those balance sheets,” he says. “I think the most intense part of last year was the revelation of how much was out there, the complexity of some of those books, the demand for risk transfer products, and how quickly we had to act.”
Elsewhere, JPMorgan was pushing the geographical boundaries of its markets activities, particularly in Africa and areas of Latin America away from the bank’s regular business in big markets such as Brazil and Mexico. Bespoke opportunities proved productive in markets such as Egypt, which was grappling with a financial crisis, but there was interest from clients in many other countries too.
“We also concentrated on increasing our market-making presence in European government bonds and in US Treasuries, with more focus on automated pricing and execution,” says Thakur. “This is something that we have been doing for a while, but I think 2023 was the year where we made real progress, in particular in market-making for European government and supranational issuers.”
A big part of that was simply cracking the automated market-making ecosystem at last, becoming comfortable with an almost complete move away from a human touch in some areas. The bank now conducts algorithmic and systematic market-making for a lot of securities that it was not able to do earlier.
The business also made strides in commodities. The bank has been tinkering around the edges of geographical gap-plugging, and it has always been strong in metals, both precious and base. But energy has been a weaker area for a while.
That became a problem as energy trading and energy security became more critical in the wake of Russia’s invasion of Ukraine in February 2022. After the sale of its physical commodities business back in 2014, JPMorgan’s product mix was no longer set up for that, and competitors that had a heavier physical footprint in energy were able to benefit from the changed dynamic, especially in 2022.
“Our competitors who have a larger physical energy footprint have managed to better monetize the volatility in the energy markets in the last few years,” notes Thakur. “We are, however, focused on rebuilding in parts of physical energy.”
Concentration
On the face of it, the markets business seems ever more concentrated today. After all, among the dozen big global banks, the share of markets revenues accounted for by the big five US banks was 68% in 2023, up from 65% in 2019. Being number one, JPMorgan is of course a beneficiary of that trend, but the apparent trend is only partly true.
In much the same was as private credit sponsors have taken huge share from the DCM and syndicated loans businesses, the market-making community has made inroads into areas such as exchange-traded fund and portfolio trading. That comes at a cost for the traditional banks, particularly if the only viable response is to build scale.
We are, in general, on a journey of greater concentration in the global markets business, and that concentration today includes alt-competitors
Jason Sippel, JPMorgan
The good news for JPMorgan is that those costs have fallen less on it than on second-tier investment banks, and certainly those outside the top five, where revenues can be thin gruel even if they may have specific areas of expertise that make them strong in verticals that align closely to the rest of their business.
Concentration is still taking place, but it now includes the biggest of the non-banks. Sippel argues that JPMorgan is in a strong place to compete because it already has scale – and because there are technological developments that are making scale easier to finance.
“We are, in general, on a journey of greater concentration in the global markets business, and that concentration today includes alt-competitors,” says Sippel. “The rise of the ability to manage and interrogate data at scale, even before getting to artificial intelligence, provides huge economies of scale. Conversely, technology investments – notably in process automation – have meant that the diseconomies of being large are continually coming down.”
JPMorgan has areas within its markets business, like agency execution, that can be manned by just a few people but are still able to see volumes double in the last few years because of the way technology can now be deployed.
The other advantage that a big bank like JPMorgan continues to have is that the scale of financial resources needed to support the very biggest clients is still difficult to find outside the traditional bank sector.
“As markets go up in size and balances go up, there are only so many players who can provide the financial resources that people need,” says Sippel. “If someone comes to us and borrows billions of dollars, we will of course make some money on those loans, but that is not just a financing transaction – it is the entry point to a relationship.”
Question of scale
One of the already great strengths of JPMorgan’s markets franchise as a whole is its quality through the whole breadth of its scope.
“We have the most homogeneous footprint across products and regions, so you would be hard-pressed to find any one area where we rank outside the top three, even on small-scale products,” says Sippel.
For all that investment bankers like to stress the importance of quality over quantity in the bespoke worlds of advisory and capital markets, in the secondary franchises the simple fact is that scale matters enormously. No firm that lacks it will ever be considered a leading player in a broad sense.
That is not to say that the competition is not formidable in certain products or regions. HSBC has a corporate business that is difficult to rival, Standard Chartered is excellent in Asia, the French banks continue to enjoy their expertise in equities, particularly derivatives, and Deutsche Bank – for all its recent challenges – retains its excellence in credit trading.
When you bank a client from day one, when they ultimately come to do something that is transformational, the likelihood that they do it with you is elevated
Filippo Gori
But scale on a JPMorgan level is rare, and among the traditional players only its biggest US rivals have it. Heft elsewhere is provided by the non-banks such as Jane Street, firms who can play on their advantage as non-regulated entities. Their flexibility gives them the ability and impetus to attempt to disintermediate the banks, another driver for JPMorgan’s effort to use its penetration in other areas of banking to allow it to offer something in its markets franchises that non-banks cannot.
Bankers at the firm also highlight the collegiate culture of the investment bank. Every firm claims this, of course, and most peers today have some variant of a cultural effort internally to unite disparate businesses around clients rather than acting as the product silos of old. ‘One Goldman Sachs’ is one of the higher-profile recent efforts, but something similar can be found at almost all the big shops.
Sippel argues that this is more effective – and more entrenched – at JPMorgan than elsewhere, having been an explicit priority for at least the last 10 years.
“We reach very well across the aisle within the bank, so it is quite easy to take an existing relationship and leverage it in another area,” he says. “Other banks are trying to do this, but we have been there for years.”
The power of incumbency
For investment bank rivals, JPMorgan remains the ultimate target. Those rivals might be lessening in number, but not in potency, particularly as non-banks rise in scale and scope in both lending and trading. Boutiques have also eroded the share of all the more universal investment banks in recent years.
Gori is sanguine about the challenge.
“I’d rather have the option to compete across a number of businesses and be able to be strategic than have only one product that I can do really well but is vulnerable to changes in the market,” he says.
Institutional strength, non-US corporate weakness
A differentiator for JPMorgan’s markets business compared with some peers is its strength in the institutional space – a strength that stands in contrast to a relatively weaker corporate franchise outside the US.
“Our large market-making presence, balance sheet and at-scale product offerings across asset classes and geographies is what differentiates us the most,” argues Pranav Thakur, co-head of the markets business. “Our other strength lies in our very strong relationships with the largest asset managers, sovereign wealth funds and hedge funds across the globe.”
That dominance is powered by the way in which the bank approaches the management of those relationships, which is not just on a lines-of-business basis, with JPMorgan’s credit team talking to a client’s credit portfolio managers, for instance, but with an overlay that manages the overall relationship with the client and can therefore more easily identify where gaps might exist with a particular client.
That matters more than ever today, because while it is true that the markets business globally is becoming more concentrated among the biggest banks, that same dynamic of growing size and concentration is also being seen on the buy side, with the biggest clients becoming ever larger.
Corporate franchise
On the corporate side, JPMorgan has an obviously strong franchise in the US, but has been beefing up its work with corporates outside its home market. That is an effort helped by the firm’s reorganization of its corporate and investment bank, bringing the commercial bank into its orbit.
The corporate piece of a markets business is quite different to the institutional piece for the simple reason that corporates are, broadly speaking, not transactional. They also work in the context of an entire ecosystem, which needs the corporate banking and the payments business to be plugged into it. Again, this is where JPMorgan’s new structure of greater integration between the investment bank and all parts of the corporate and commercial bank brings dividends.
“Our corporate franchise is one of the strongest in the US, but there is work to be done in the other regions,” says Thakur. “Corporates work in an ecosystem and are less transactional, hence the corporate franchise is hard to crack on a standalone basis. We are working very closely with the global corporate bank and the payments businesses to materially improve our market share with them outside the US.”
That is obviously one area where JPMorgan’s newish structure of greater integration between the investment bank and all parts of the corporate and commercial bank will bring dividends.
“People don’t necessarily realise the full impact of it now, but I think in three years you will realise how impactful the commercial bank merger with the broader CIB will have been on our franchise,” adds Thakur.
It is clear that JPMorgan is setting great store by the closer integration of its commercial and investment banking activities – the belief that this will unlock the power of the bank’s network underpins much of the reorganization and the strategy set out at the 2024 investor day.
Gori echoes Thakur’s comments about its likely effect.
“We are starting from the assumption that integrating the commercial bank with the broader banking organization brings an enormous opportunity, which is the power of incumbency,” he says.
After all, the commercial bank has about 75,000 clients, and added about 5,000 in 2023 alone.
“When you bank a client from day one, when they ultimately come to do something that is transformational, the likelihood that they do it with you is elevated,” Gori adds.
Like many institutions that are leaders in their field, JPMorgan often illustrates the tendency for much of the external impression of it to become concentrated into the persona of the leader. As his career has lengthened, Dimon has increasingly been cited for what he says about things other than banking, as well as continuing to act as a lightning rod for much of what is said about banking by others.
That is a frequent trait of the best-regarded leaders, whether in sport or business: it is often something that can allow those further down an organization the space to perform. But success also comes from insisting on people taking responsibility and leadership throughout the ranks.
This empowerment is a characteristic that JPMorgan bankers frequently reference. Petno alludes to it too, noting that the firm has strengths that allow it to respond fast in difficult circumstances.
“One of the terrific things about JPMorgan is that it has a lot of autonomous leaders who make good decisions under pressure, and who were trained for that,” he says. “It worked well for us last Spring.”
As 2023 showed, the more preparation JPMorgan does, the luckier it seems to be. But its breadth and depth continue to be its biggest strengths, and if the bank sees a way to improve, it is perhaps in deploying that scope ever more effectively in service of its clients.
Petno sees it in simple terms.
“Our objective is to be our clients’ most important financial partner,” he says. “It’s not a transactional state of mind.”
