JPMorgan Chase & Co. (NYSE:JPM) appointed investment banking veteran Craig Delany as chief investment officer, following its $5.8 billion devastating losses in derivatives trade.
Delany previously served as chief operating officer in JPMorgan’s mortgage banking unit, which was also problematic. He also worked in the Investment Bank for 18 years.
According to the report from the Wall Street Journal, Delany will report to former CEO Matt Zames, whom he replaced and was promoted as co-COO for the entire bank along with Frank Bisignano. As the bank’s new CIO, he will be responsible in managing and preventing risky trades that might result in large losses similar to the London Whale.
Matt Zames and Frank Bisignano wrote in a internal memo that Delany will also remain as part of the company’s Executive Committee and the Mortgage Banking Executive Committee. The memo reads, “We’ve both had the privilege of working closely with Craig. He’s an outstanding executive who understands how to build and run complex businesses…He also has a deep understanding of investing, trading, capital markets, as well as the financial analytics, risk and technology that support these businesses…” Zames and Bisignano described Delany as a “great person with exceptional character and judgment.”
According to them, Delany managed some of the toughest challenges faced by the company during the 2008 financial crisis, particularly in preventing its Mortgage Division from bankruptcy and making it profitable for the past 18 months. He was also was involved in the Bear Stearns acquisition.
Meanwhile, a report from Nomura Equity Research cited that JP Morgan’s capital ratios are solid and are likely to build quickly toward the 9.5 percent performance target. The research firms analysts noted that the firm’s solid core, such as consumer and commercial banking, asset management, TSS, and Cards, among others, combined with the declining mortgage-related costs will provide a good tailwind to its decent earnings.
Analysts also believed that JPMorgan Chase & Co. (NYSE:JPM) is ready to overcome future negative challenges in Europe.
According to the research firm, JPMorgan’s management strongly believed that splitting up the firm is not in the best interest of its shareholders. Given its synergies, economies of scale, and diversification benefits across its businesses, JPMorgan Chase & Co. (NYSE:JPM) management think the firm has better growth and return of capital as a combined entity. Nomura noted that a breaking up of JP Morgan would result in increased expenses, lost revenues, and higher funding costs.
Analysts in the research firm maintained their “buy” rating for JPM stock, due to the company’s strong earnings power, good business, decent profit, solid capital returns, and reasonable valuation. Its price target remains at $45 per share.
Nomura met with Jamie Dimon and they note the following remarks:
JPM feels it has had better growth and returns on capital as a combined entity given synergies, economies of scale, and diversification benefits across its businesses. At the Investment Bank alone, 25% of revenues come from the comm’l bank and plenty of TSS flow also comes from middle markets. A break-up scenario comes with plenty of issues, too, such as increased expenses, lost revenues, and higher funding costs and we think people forget about the important relationship the retail and comm’l banks share. Nomura states that Jamie Dimon has said, ‘Splitting Up Is Not in the Offing.’
JMP Securities also met with Todd Maclin, who stated that there would be no split up of JPMorgan. JPM notes, JPM management avidly supports the universal bank model, while we are not yet fully convinced either way. November’s election will have a big impact on the matter, in our opinion.