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The top echelons of wholesale banking might be as competitive as ever, but they are also more fragmented. Regulation and the cost of capital necessarily limit the scope of franchises in ways that the 1990s architects of one-stop shops could hardly envisage.
The biggest firms will still claim to have a more or less full-service offering, of course, but specializations persist – look at Morgan Stanley in equities, Citi in macro and rates, Bank of America Merrill Lynch in credit, Goldman Sachs in M&A and State Street in custody.
There is, however, one bank that can still lay better claim than most to the position of preeminent wholesale financial supermarket – JPMorgan, under CEO Jamie Dimon. On a trailing 12-month basis to the end of the third quarter 2018, the bank was biggest by revenues, profits, DCM revenues and fixed income revenues. And in any segment where it didn’t lead, it came close.
Viswas Raghavan, chief executive of JPMorgan in Europe, traces the bank’s success through the manner in which it is now able to compete at the very top of each vertical.
“The competition we face is strong, but it is different in each vertical, whether that is equities, macro and rates, custody, credit or M&A,” he says. “The only common factor in all of this is JPMorgan.
“We have stood out through our scale and completeness – and being among the best in class in all products,” says Raghavan.
Balance sheet heft helps and Raghavan acknowledges the advantages of the combination of advice and financing firepower.
“The differentiator is our ability to advise while having the resources to provide and finance $20 billion or $30 billion to execute the strategy,” he says. “This is powerful, but we have only been able to do this by becoming the best in every vertical.”
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What is the bank doing better these days? For Raghavan, it is the integration of the investment bank with the corporate bank, which, internationally at least, has traditionally been seen by some outsiders as one of the chinks in the armour of the bank. “What we have done is to be super joined-up around the corporate banking opportunity, whether that is cash management, clearing or FX. If you do that and you also overlay corporate finance based on a client’s needs, then you will deliver a holistic banking experience.”
It still lags Citi and HSBC in certain areas, such as trade finance, but it is gaining ground – global head of treasury services Takis Georgakopoulos recently told Euromoney that the bank was aiming for nothing less than becoming the top transaction services bank in the world.
It is constantly upgrading – it is shifting its various payments operations onto one integrated global platform, for instance. It is not scheduled to complete that migration in Europe until 2019, but in the first half of 2018 the bank had already broken into Coalition’s top three ranking for transaction banking in the region.
A development like that plays into another theme at JPMorgan – the bank’s ability to deploy technology.
“Tech is going to be the single biggest catalyst to the transformation of our industry,” says Raghavan. “We are spending nearly $11 billion a year on tech, including over $800 million a year on cyber. When you consider how low-touch equities has become through electronification; 10 years ago we were outside the top 10 among banks in equities electronic trading and now we compete at the top.”
JPM already leads in fixed income sales and trading; at the end of the third quarter its trailing 12-month revenues were 9% ahead of second-placed firm Citi. But applying that same investment in tech to that side of the business is bearing fruit, says Raghavan.
He describes tech as a game-changer but still rooted in the client. “This has been realized through everything from algo trading and big data through to the gradual application of artificial intelligence, but it is really about the client experience and how a client wants to consume JPMorgan.”
And he stresses that the bank’s tech investment is about more than just spend. “Yes, in order to make this investment you need to be able to afford it, but it is not just a question of spending the money. It is about measuring and monitoring what that investment is yielding – you cannot just hang your coat on your spending.”
In the spirit of grudging advocacy, the name of JPMorgan is often enviously referenced by other firms in respect of its tech spend. And there is no better recent example of its ability to lead the way than its development of a payments information network using Quorum, based on the Ethereum blockchain. By the middle of October 2018 some 100 banks had signed up.
