Both sides’ second choice

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Chase Manhattan has never made a secret of its desire to buy an equities franchise to complete the line-up of its wholesale and investment-banking operations. So the announcement on September 12 that it was buying JP Morgan for about $35 billion was no great surprise. But it is also well known that JP Morgan was far from being Chase’s first-choice partner. It would have preferred a deal with Merrill. Inside Morgan, too, there is lingering disappointment that the bank could not complete its transformation into global investment bank unaided. The two sides must put these disappointments aside quickly.

The merger of Chase and JP Morgan has caused few shock waves. "This is the deal that should have been done a year ago," says Mike Mayo, a bank analyst who left CSFB last month. "But better late than never." Another analyst, Ron Mandle at Sanford Bernstein, had even recommended such a deal in a report at the end of August.

The proposed merger brings together the two commercial banks in the US that have enjoyed the most success in transforming from lenders to investment banks. In doing so they have followed very different strategies.

Chase and Chemical concentrated on extending their credit markets franchises by leveraging off their loan platforms, claiming by 1997, two years after the banks merged, a formidable presence in high-grade and high-yield debt, foreign exchange and derivatives, where it focused on the plain-vanilla end of the market.

They then used that to muscle their way into M&A mandates, reaching sixth in the US last year - although M&A league table standings can be notoriously misleading. Chase would often gain credit despite its role being simply on the merger financing side, not pre-merger corporate advisory. Only after the Chase-Chemical merger was complete did the combined firm even start to develop an equities strategy.

JP Morgan meanwhile started in 1990 to transform itself into a fully-fledged investment bank, with the aim of offering the full set of products to its clients. The date was dictated by the regulators. Until then, Glass-Steagall prevented commercial banks from running securities underwriting operations in the US. Equities and M&A were at the top of the wish list from the start. It had the vision but unlike Chase, it undertook no mergers or acquisitions to push it along its way. It chose to build.

The two banks also pursued different customers.

Morgan had a narrow, if prestigious client base - including many governments, the US Fortune 500 companies and their equivalents abroad. The Chase Manhattan of today has 5,000 major clients in the US alone, including far more in the middle-market range than would ever have found their way into Morgan's blue chip rolodex.

Bringing together different clients and customers has, in theory, great potential. But Morgan was not Chase's ideal choice. First under Walter Shipley and Thomas Labreque, CEO and president respectively after the 1995 Chase-Chemical merger, and then under William Harrison, who took over as CEO in June 1999, the firm explored a number of options, the most likely being a merger with Merrill Lynch. That rumour persisted for at least two years, becoming especially strong after Merrill's $1 billion-odd credit markets loss following the 1998 summer meltdown.

Merrill's reasons for saying no were several, but one of the major ones was cultural: why would an investment bank as successful as Merrill want to be swallowed up into the bureaucratic structures of a commercial bank, even one with a sizable wholesale banking operation of its own?

Rebuffed, Chase decided to act rather than wait around and hope Merrill might change its mind.

Starting last July, Harrison, who was head of wholesale banking before he became CEO, went on a spending spree for talent and other houses. Each of his moves filled one or two gaps in the investment-banking franchise, but taken together they form an elaborate rebuttal by Harrison and his fellow executives of the notion that a commercial bank cannot run an investment bank effectively.

First, he persuaded Neal Garonzik to join as head of strategy for equities and asset management. Garonzik had been co-head of equity capital markets at Morgan Stanley, quitting in 1997 after losing an internal battle for control. He became an outside adviser, resisting offers to come on board officially until July 1999. Earlier this year, he took on responsibility for private banking, custody and Chase.com, and relinquished control of equity.

In September Harrison announced he was to spend $1.35 billion on Hambrecht&Quist, a west-coast tech equities and M&A specialist.

Chase had commercial and wholesale customers from the new economy, but none of the high-margin products. H&Q would also become a useful in-house shop to take public Chase Capital Partners' venture capital investments, which are predominantly new economy.

Next, in April, Chase splashed out $7.7 billion on Flemings. It was a high price, but it brought the bank a well-respected Asian-focused full-service investment bank and $99 billion in assets under management. Almost immediately, despite the presence of Garonzik, and the equities chiefs from H&Q and Flemings, Harrison appointed Steve Black as head of equities. Black had been a colleague of Jamie Dimon while the latter was still co-CEO Salomon Smith Barney, and had resigned soon after Dimon in November 1998 following a bust-up with co-CEO Deryk Maughan.

Expensive M&A expertise

Within two months Harrison doled out another $500 million to persuade Geoff Boisi to fold his M&A boutique, the Beacon Group, into Chase's investment bank. It was an effective, if slightly expensive, way of hiring some very talented bankers, including Boisi himself. He had been made a partner of Goldman Sachs at the age of 31, and was one of the top five at the firm until he left in 1992. Harrison immediately made Boisi, a long-standing friend and adviser, overall head of Chase's investment-banking operations, relegating the ebullient and boisterous Jimmy Lee, who had run the operations for years, to a client-focused, as opposed to management-heavy role.

Boisi is now the co-CEO of the combined JP Morgan Chase investment bank.

So, come the beginning of the summer, the commercial bank Chase was being run for the first time by a man, Harrison, who had run wholesale banking; vice-chairman Don Layton running global markets; vice-chairman Neal Garonzik, an equities head from a bulge-bracket firm; vice-chairman in charge of investment banking Geoff Boisi, who had been in contention to run another, Goldman Sachs, before starting and running a bureaucratic-free boutique; and a plethora of CEOs, chairman and product heads from H&Q and Flemings. It owned one firm specializing in the growth area of the moment, technology, and another specializing in one of the geographic growth stories, Asia.

Chase's leaders were confident they were building the right pieces. "They have been saying for at least a year now that they believe they understand how wholesale banking will look in five to 10 years from now," says Diane Glossman, managing director and banks analyst for UBS Warburg in New York. "They don't feel so sure of the retail side of the equation, though."

Marc Shapiro, head of finance and risk management at Chase, concurs with Glossman's summary. "That is true. As Bill Harrison likes to put it, the endgame in wholesale banking is as clear as the palm of your hand. Retail is very different; no one institution has even a 5% share of that market."

Equities was long a target. Shipley told Euromoney in April 1999: "We start with the fact that we execute mergers extremely well and that we would need complete confidence in successfully executing any transaction we undertake. It's not enough to say 'we need equity'. The other side has to say: 'We need Chase'."

Harrison has spent the past year convincing the outside world that not only does Chase want and need equity, but that it can also deal with equity. It has been a very successful operation, says Don Layton, vice-chairman and now co-CEO of the investment bank with Boisi. "It's like Archimedes' lever. All Chase needed to do next was to find a partner with the right fit and the right vision We knew the leverage would be tremendous."

Hancock's last hours

Peter Hancock was on his way back to New York after attending a family funeral in the UK. It was Thursday 7 September, and was to be the last time he would fly as an employee of JP Morgan, the bank where he had worked for the previous 20 years. At 42, many still regarded him as one of the firm's rising stars. He had joined when Morgan was still regarded as a blue-blooded commercial bank and the rightful heir to the work and reputation of its founder, J Pierpont Morgan. But Hancock had been instrumental in the drive to turn Morgan into an investment bank, and deserves much of the praise for developing its strong credit markets franchise.

But just last year CEO Sandy Warner had made him chief financial officer. Officially, it was a promotion, but those who know Hancock believe it was a move that frustrated him. "He's a markets man, and would rather be running a profitable business than counting beans," says one. "It made him question what Sandy thought of him, and ultimately question his role at Morgan."

He had decided to resign, and would have done so at the end of August had the funeral not intervened. He insisted on being in New York when the news broke, so on the evening of the 7th those involved were waiting around nervously for his return.

They had good reason to be nervous. In the third week of August, while on business in the US outside New York, Warner received a call from William Harrison, a friend of 25 years and CEO of rival Chase. He was proposing that Chase buy JP Morgan. By the time Warner was back in his office on September 5, the deal was all but sealed. In the interim, however, CSFB had bought DLJ, and speculation was now rife as to who would be next, with JP Morgan's name at the top of the list, either as buyer or seller.

That was the dilemma worrying Morgan's senior staff. If Hancock resigned now, it would add to the speculation, and might even force an announcement on the deal before either side was fully ready. If he waited until after the announcement, it would be read as a split over doing the deal both within JP Morgan as well as between the newly merging firms.

The Financial Times broke the story on Friday evening, and conspiracy theories were soon doing the rounds. He'd fallen out with Warner, one had it, because he opposed the deal or deals Warner was proposing. "Hancock firmly believed that JP Morgan could always go it alone, as Warner used to," says a former Morgan employee. "Warner had a Damascene conversion to the benefits of selling three months ago, however, but Hancock didn't." By Monday 11th, strong rumours of a sale were hitting the market, and were confirmed the next day.

Just a couple of weeks before resigning Hancock had sold 47% of his holdings of JP Morgan stock, not a rational move for someone who ought to know a deal was in the offing in which the share price was bound to soar. "There are all these conspiracy theories about Peter leaving," says Joe MacHale, JP Morgan's CEO of Europe, Middle East and Africas. "But the simple fact is he announced his intention to resign a couple of months ago, so was not involved in any discussions about deals. And he sold all that stock. Do you really think those are the actions of a man who knows the price is about to jump?"

A protest sell-off?

Some Morgan staff still believe that indeed he did know what was going on, and disagreed. "He sold his stock as a statement," says one former employee, guessing at Hancock's motives. "As a way of registering his disgust at the probable deal in the pipeline." It doesn't sound very likely. But the debate over Hancock's resignation serves as the focal point for the two opposing camps in JP Morgan.

On the one side are those who are in favour of selling, believing that this is the best way to capitalize on the structure and product expertise Morgan has spent a decade building.

They accept that this is the better way forward, even if it's not their first choice. "I'm emotionally very attached to JP Morgan," says MacHale. "I've worked here for 21 years. I'm very proud of what we've built but as a shareholder and someone looking to grow the business in the future, this is a great deal."

MacHale's views are echoed around the bank.

Warner certainly shares them. "He is desperately upset that selling was a better option than continuing to build," says one insider. "He knows it's the right decision, but it's galling for him." The merger means that JP Morgan options vest sooner and at a higher premium than staff could have hoped.

There are still those who remain convinced that Morgan's strategy to build and not buy was and still remains the best. The firm had staked its reputation on that strategy, sometimes talking to its competitors but never wanting to dilute the hallowed Morgan culture.

The firm has made just two acquisitions in the last 100 years. In 1959 it bought Guaranty Trust, and in 1998 it bought a 45% stake in American Century, an asset management firm. But there was no attempt to buy into the first round of US investment banking consolidation, when tech specialists Montgomery Securities, Robertson Stephens, Alex Brown and Hambrecht&Quist were bought up by big commercial banks.

And in Europe Morgan either failed or refused to try to buy the equities units of BZW or NatWest when they were up for sale in 1997.

Maybe now its executives regret not making smaller acquisitions earlier.

Maybe they never had the choice. Glossman at UBS Warburg says: "JP Morgan was never in an advantaged position to do a big deal in the 1990s as its stock always traded at a discount. That would have made any significant deal expensive. And the execution risk was high as they had a very strong culture and no track record of integration." In fact, says a hedge fund manager who invests in financial stocks, there was only one bank whose stock performed worse than Morgan's - Bankers Trust, which was rescued from near bankruptcy in 1998 by Deutsche Bank.

When it started its push into investment banking, a little over 10 years ago, Morgan was one of the US's largest commercial banks, and its most respected. It carried serious clout in major markets around the world, built on its late 19th and early 20th century reputation for financing both the US as well as several European governments and corporations.

But profits in the mainstay of its business - loans - were decreasing fast. Morgan's prestigious clients were not generous payers.

Investment banking was the more profitable route.

Within 10 years Morgan had built a profitable business in equity and debt capital markets, and in M&A. But it came at great cost. The firm spent over $3 billion building equities, and only in 1998 did it break even. And there was a problem: although the franchise would have been very attractive back in 1990, the financial world had refused to stand still and wait for it.

An air of self-delusion may have set in. Back in 1998 JP Morgan was the target of takeover speculation. Of all the names that were thrown up, Morgan executives would later privately claim that only one aroused their interest: Goldman Sachs. Some fantasized about a merger with Goldman in which the Morgan name would prevail. It's diYcult to see that ever happening.

That same year, the co-head of investment banking, Jacques Aigrain, made a rather startling comment to Euromoney claiming that although not as big as the top tier, Morgan was no also-ran in investment banking. "We have been unlucky in that 35% to 40% of the M&A business over the past two years has come from the two sectors we were not as strong in, namely US banking and telecoms and technology.

If you leave them out of the equation we rank in the top five all the time."

Unlucky? Not being in banking deals is fair enough, but the lack of a telco and tech banking platform, an annoyance even two years ago, now stands out as a gaping hole in JP Morgan's franchise, whether M&A or equity.

Morgan has managed to build from scratch a business that landed it in sixth spot in the US equity underwriting league tables last year. But it only underwrote 21 issues, of which just eight were IPOs. To get sixth spot, these had to be big-ticket deals, of course, but this record points to a fundamental weakness. Morgan had been unable to extend its client reach much outside its old core base, one which needed few, if large deals, and which would not pay the highest fees.

Leveraging off the platform Warner, investment banking head Clayton Rose, and other executives, understood the next step meant extending client reach. "We've built the platform," Warner has said in the past. "We're not transforming any more, we've transformed.

What we want to do now is leverage the platform we have and start going after business with less traditional clients of the bank, the middle-tier issuers and tech companies."

On its own it's not been overly successful. It has won some very juicy equities mandates from, for example, telecoms company Corning (Morgan lead managed a $2 billion secondary offering for this traditional Goldman Sachs client), and lead managed the largest internet offering to date, a $2.2 billion equity deal for Network Solutions. But is probably better known in the tech sector for its private equity investment in a particular dot com start-up, Boo.com, which went so spectacularly bankrupt in May.

The one big question was this: if it took 10 years for Morgan to get this far with clients it already had, how long would it take to get non-traditional clients first to take the firm seriously and then to start choosing it on deals, in preference to more nimble and more experienced competitors?

Perhaps more worryingly, the firm has even been losing out in credit products, long a Morgan stronghold. Outside of structured products, where it still ranks number one, Morgan has fallen in rank in the vast majority of categories in which it appears in Euromoney's most recent capital-raising poll, published last month.

Warner prefers to judge a bank's success by whether it is a client's first call on a deal: an esoteric, almost old-fashioned way of judging a bank's reputation. It doesn't address the constraints of a small customer base, and it is also inherently passive.

Clients, whether institutional investors or corporations, want to see banks bring them ideas and solutions, not wait by a phone to get their business.

Not all bad news

It's not all been bad news at JP Morgan. A look at the league tables and its more recent financial results show it has succeeded in building a profitable operation. In the first half of 2000, for the first time in its decade-long investment-banking experiment, the firm actually recorded a return on equity over 20% - 21.5%, to be exact, up from 18.4% in 1999, and far better than the 1995-98 period, where ROE was around 14%, falling to 8.6% in 1998 due to the Asian and Russian crises. But with Morgan Stanley, Goldman Sachs and a resurgent Lehman hitting 30% ROE or more, JP Morgan appears rather to have stood still while other have roared ahead.

And much of its recent ROE improvement is due a drop in expenses and investment - the latter a case of completing most of the work in building up equities. The bank's growth from 1995 to 1999 in revenues was just 11%. Most of its would-be peers grew revenues at double that rate, and DLJ and Goldman at nearly triple. As for net income, JP Morgan registered a 12.2% growth over the same period, exactly half of the nearest competitor, Merrill Lynch, and way below Lehman, which recorded a 50.9% increase.

Warner's dilemma

This was the dilemma Warner faced: Morgan had executed plans to transform that were more aggressive in concept than its peers, but that had been pursued in Morgan's traditionally conservative fashion. It had been prevented by its stock price and its culture from using an acquisition for a short cut.

Senior Morgan bankers are considered by their competitors to be good, but not industry leaders. One exception is Roberto Mendoza. But he resigned earlier in the year, and since was snapped up by Goldman Sachs, a clear endorsement, if any were needed, of his skills. Whether he lost out to political infighting or lost heart is not clear, but as one insider puts it, "he was someone who should have had a much larger say much earlier on in the direction the bank was taking. In the end he left because his more conservative - some might say mediocre - colleagues kept a tight control of the reins."

By 2000, after a decade of building, Warner was running a firm which was all dressed up but with nowhere to go.

The deal with Chase has some echoes of the merger of Citicorp and Travelers. JP Morgan sees its acquirer as the spur to kickstart more aggressive management, as Citi viewed Travelers. In this case, Morgan brings the product, Chase brings the relationships.

Certainly Chase CEO William Harrison would like to think of it in those latter terms, where "one plus one equals much more than two in revenues" as he kept saying on the day of the merger. As he started to do the rounds with Sandy Warner on the day they announced they were to join forces, he was keen to make one point very clear very quickly. "This is about revenue growth, not about cost cutting," he kept saying.

Investors in US commercial banks in merger situations grew tired of the cost-cutting rationale two years ago. Too many banks were promising it and not delivering it, nor indeed delivering on their revenue predictions. Chase is one of the few notable exceptions. It got its cost-cutting mergers out of the way before they became passé, and has delivered on growth.

Nonetheless, Warner and Harrison have earmarked $1.5 billion they can eke out in cuts over two to three years, roughly equally divided between real estate, systems and staff.

On a trip to London after the announcement the two indicated that this would equate to about 3,000 jobs. "These cost savings appear to be conservative," says George Bicher, banks analyst with Deutsche Banc Alex Brown in New York. "But the revenue synergies are more difficult to forecast."

Nonetheless, they have given it a try. "We're just using equities as an example for now," explains Shapiro. "We looked at our top 800 or 900 top clients in the US, what we call our blue and green clients, and worked out how much they had paid in fees to the Street for their equity deals over the last three years.

We then assumed that we could have captured 20% of those fees, which works out at about $400 million." And that is just for a portion of Chase's clients - it has 5,000 in the US alone. Given its obvious pride in its merger integration record, the chances are Chase is deliberately understating what it feels it can earn, so as not to cause disappointment down the line.

Shapiro points to the Hambrecht&Quist deal as evidence of how well new acquisitions do under Chase. "I was just looking at the figures for the deals H&Q has completed for Chase clients since we closed the deal last November," he says. "So far we've booked $120 million in revenues, and expect to book the same again by the end of the year, mostly in equity but there is some M&A in there. And that's just a tiny fraction of what we feel we can achieve with JP Morgan worldwide."

The Chase/JP Morgan merger has considerably more overlap than did the investment-banking combination of Citicorp with Salomon Smith Barney, meaning more job-cuts and a drop in productivity that is bound to make the transaction dilutive to earnings for at least a year if not more. It is an element Harrison and Warner have understated somewhat.

"You may think we have a lot of overlap, especially in credit markets and foreign exchange, but actually if you take a closer look you'll see that we are quite complementary," says Harrison. "JP Morgan is involved much more in the highly structured forex and derivatives products, we focus more on the plain vanilla end of the spectrum."

This is overly simplistic, ignoring for example the fact that, as Don Layton said at the analysts meeting, the combined risk book of the two banks will be scaled down, which will hit jobs and revenue.

The cash side might provide an apt outline of overlap. "They cover more of the triple-A and double-A-rated issuers," says a debt capital markets banker for Chase in Europe. "Whereas we go after the lower-rated guys. There's a 25% overlap in clients as far as we can tell at the moment."

What about the prop traders?

One area of confusion is what will happen with the amount of revenue Morgan generates from proprietary trading and structured products, businesses Chase has largely kept away from.

Deutsche's Bicher says: "based on conversations with Chase's management, the company intends to not only keep, but could grow, the proprietary trading businesses at JP Morgan. Our concern is that Chase has either changed its mind about the relative value of proprietary trading or that the company is rationalizing its need for revenue dollars so as to offset the dilution in this transaction."

A throwback to Salomon Brothers' prop traders, perhaps, who survived for just one year before trading risk-averse CEO Sandy Weill chose to shut them down?

Not so, claims Layton. "JP Morgan's proprietary trading business is not the same as it was even two years ago. It's much less volatile. And their structured products business is a great complement to our flow business. It's not that we avoided these businesses. We built off our strengths, and those happened to be in flow businesses."

Analysts aren't convinced. "Harrison, Shipley and Shapiro have always said that they are not comfortable doing riskier structured products and prop trading," says Ray Soifer of Soifer Consulting. "But guess what? That's what they've got with JP Morgan."

On paper this looks like a good transaction.

First, Chase gets a solid equities platform, if not the one it wanted initially. It also gets an excellent structured products business, in both credit markets and equity derivatives, a business with a 100-year history in Europe, and it makes JP Morgan Chase the third-largest active fund manager behind Fidelity, with $720 billion. "By asset class, geographical spread and type of investment style, we have a very balanced business," says Shapiro.

But there are pitfalls out there. For a start, Chase has a glut of senior bankers, and not enough jobs to go round. It has four diVerent systems to integrate fully. Chase-Chemical took an astoundingly short seven months, the bank claims. Shapiro estimates 18 months for JP Morgan, and some analysts believe even three years is optimistic.

It's different, this time

Chase executives will always point to their success in earlier mergers as proof of their ability, and not without good reason: there are precious few examples of commercial bank mergers that have truly transformed the partners, and the Chemical-Manufacters Hanover-Chase deals are two of them.

But this deal is different, explains Glossman. "Chase has done a very good job in the past, but in this case the majority of the consolidation is taking place in businesses where people are the most important commodity, not overlapping systems."

The role the retail bank will play is even less clear than before. It now makes up just 18% of revenues, is small (it only operates in New York and Texas) and some read into Harrison's equivocal statements about it at the analysts' meeting an intention to dispose of it. David Coulter, formerly CEO of Bank of America who joined Chase via the Beacon Group, has been put in charge of retail strategy, but don't expect a sale just yet. "The pooling requirements for the JP Morgan deal prevent us from selling anything in the next two years which we hadn't already put up for sale," explains Shapiro.

Back at the investment bank, culture clashes could yet be a negative factor as the employees start working as a team. And then the nagging truth is that this deal has not given Chase the premier league equities platform it so keenly desired.

But Chase feels it finally has the base it needs in each of the major investment-banking businesses to turn now to organic growth. "We think it's a great platform," says Shapiro. "There are some minor holes, but we can build on them. This will be our last acquisition for a while, I would think."

Some still question whether the deal actually gives Chase the scale it craves, especially in equities. "This does not make them a bulge-bracket player," says Mayo. "They're still behind the brokerage leaders, and still need more in equities."





Leaders, leaders everywhere

When one bank buys or merges with another one, there are always people issues to deal with.

One of the biggest is who to put in charge.

For the new JP Morgan Chase it's not just an issue, it's the makings of a doctoral thesis in human relations. For in its desire to prove its mettle as a full-service universal bank Chase has in the past year over-burdened itself with former CEOs and business heads.

An important decision was who should run the equities operations, the raison d'être for the deal. No-one has been chosen to run it from Hambrecht&Quist, which Chase acquired at the end of last year for $1.35 billion and which brought a tech-focused equity franchise. Nor have any of the Flemings staff who came on board after the $7.7 billion April acquisition of the Asia-specialist UK investment bank. Not even any of the likely candidates from JP Morgan were given a chance, neither investment banking chief Clayton Rose nor equity capital markets head Andrew Wilson.

Instead the job went to Steve Black, hired by Chase in April, just after the Flemings acquisition to run equities. He had quit from a similar role at Salomon Smith Barney 18 months earlier.

That in itself was surprising, because less than a year before that, in August 1999, Chase CEO Bill Harrison had hired a long-time friend, Neal Garonzik, to run equity and asset management strategy. Garonzik was until 1997 co-head of equities at Morgan Stanley, resigning after losing out in a power struggle to Peter Karches, who last month announced his own retirement as COO. Garonzik's role at Chase changed over the year he was there in any case. He took on private banking, custody and Chase.com while relinquishing his core strength, equities. Garonzik resigned soon after the merger with JP Morgan was announced.

Another high-profile case is that of David Coulter, the former CEO of Bank of America who resigned when a $1 billion hole was found after the collapse in Russia in 1998. After toying with founding an e-payments start-up, he joined the Beacon Group in early 1999, only to find himself a year later becoming a cog in the wheel of one of his former rivals, Chase.

At the time of the Beacon acquisition, Harrison told Euromoney that he and Coulter were in discussions to find a role that would suit them both. Coulter is now put in charge of retail strategy, exploring what to do with a division which has received very little executive attention as the investment bank has been built up. Upon Garonzik's departure he was also given overall control of JP Morgan Chase's internet activities.

But what of the other chiefs? Like Citigroup, Chase has appointed two CEOs to run its investment bank. But they are both Chase executives, Don Layton and Geoff Boisi, and, says Layton, "This was something we were planning before the merger. Our roles are pretty obvious. I have a markets background while Geoff's is in corporate finance and M&A.

What is different is that for the first time we will have standard processes for running businesses rather than separate units with, for example, their own hiring and compensation rules."

So no obvious top role for any JP Morgan, Fleming or H&Q people. Walter Gubert has the highest-ranking job of any. The head of international investment banking at JP Morgan will continue in that role, as well as becoming chairman of the investment bank. On the rung below Boisi and Layton is Clayton Rose, who is trading down his position as global head of investment banking at JP Morgan to become COO.

As for Dan Case, the former CEO of H&Q, he is now one of four chief relationship officers for the combined entities. "We asked him to take on responsibility for a specific group of clients," says Marc Shapiro, head of finance and risk at Chase. "It's very different to his former role as CEO, where he dealt with at least five times as many clients, but he seems to be happy with it."

Chase generally finds room for former chief executives. Shapiro says: "It varies with each person, but for people such as Dan and David we generally try and get them to take on slightly narrower roles. If they see this as a winning platform, as we do, they get energized by their new role, as David is."

Shapiro himself is an example. He ran Texas Commerce Bank, which Chemical Bank bought in 1987. He stayed there running it until 1997, when he was asked to move to New York and take on his present role. Whether Case, Coulter and Black take to their roles, and whether those they might have supplanted accept them, will largely determine the medium-term success of the merger.