Douglas Braunstein, the chief financial officer of JPMorgan Chase & Co. (NYSE:JPM), will vacate his position in the company within the next two quarters. He is expected to assume a different position within the company, according to the report from Wall Street Journal. JPMorgan Chase & Co. (NYSE:JPM) is releasing earnings on Friday, making the timing of this announcement quite shocking.
Braunstein started serving as CFO for JPMorgan Chase & Co. (NYSE:JPM) in June 2010. Prior to that, he was the head of the company’s Investment Banking in the Americas. He also served as head of Global Mergers and Acquisitions several other senior positions within the company. He was involved in the JPMorgan Chase & Co. (NYSE:JPM)’s acquisition of Bear Stearns & company and the banking operations of the defunct Washington Mutual.
In July, JPMorgan Chase & Co. (NYSE:JPM) reshuffled its top executive after suffering multi-billion dollar loss from a bad trade (or hedge). Some executives in the bank believed that Braunstein status as CFO was diminished during the shake-up because he was directed to report to Matthew Zames, COO instead of reporting directly to Jamie Dimon, chairman and CEO of the company. Weeks before the bank’s losses in the trading error, Braunstein along with executives in the bank rebuffed concerns and expressed confidence in their trading positions.
During a c conference call on April 13, Braunstein told analysts, “We are very comfortable with our positions as they are held today.” According to him, the large bets of J.P. Morgan’s Chief Investment Office in London that were executed by Bruno Iksil also known as the “London Whale” was part of a “very long-term” strategy to hedge the bank’s risks. Mr. Dimon described the concerns as “complete tempest in a teapot.”
JPMorgan chase lost $5.8 billion in trading losses during the first half of 2012. The trading losses triggered investigations from government regulatory and enforcement agencies such as the Federal Reserve and the Securities and Exchange Commission (SEC). The House of Representatives Financial Services Committee also launched an inquiry regarding the issue. Braunstein and Dimon are among the top executives of the bank facing a Government probe in connection with the bank’s trading losses.
According to one of the senior executive of JPMorgan, Braunstein’s decision to relinquish his position as CFO has nothing to do with the CIO trading error. The senior executive said, “Jamie is a big fan of Doug’s, and any potential move Doug decides to make would be unrelated to the CIO issue.”
The WSJ report states that the executives of JPMorgan Chase & Co. (NYSE:JPM) believed that Braunstein did not commit any wrongdoing related to the CIO trading, and they are confident that he will not face any lawsuit after the inquiries.
Since the CIO trading error, several JPMorgan senior executives already resigned or changed their positions. Barry Zubrow, the chief regulatory-affairs chief of the bank announced his retirement by the end of the year.
A person close to the company suggested that a number of J.P. Morgan executives agreed that Braunstein will add value to the company’s Investment Bank, and he should return there.
Braunstein did not release any comment regarding his position as CFO. Many believe he might assume a position in JPMorgan Chase & Co. (NYSE:JPM)’s Corporate and Investment Bank.
Wells Fargo Equity Research had the following to say about a possible successor:
JPM typically moves executives from other areas of the bank into new and unfamiliar roles with relatively higher frequency than other banks, suggesting that Braunstein’s replacement could come from a less than ”traditional” source, and may depend on if the successor enjoys a direct reporting relationship with CEO Dimon. JPM’s strategy of executive ”rotation” suggests to us little change in business
focus and therefore we do not believe Braunstein’s departure would have a material effect on JPM’s shares.