J.P. Morgan has grand ambitions in Asia and other emerging markets. By building on its existing investment bank franchise and treasury operations, deploying its vast balance sheet and exploiting its counterparty solidity, the US firm has said it will grow its global corporate banking business and challenge incumbents.
The main objective is to find out what clients need, and then satisfy their requirements. This should help the corporate bank to grow pre-tax earnings by $1 billion a year during the next three to four years, according to Gregory Guyett, CEO of J.P. Morgan’s global corporate bank.
“We work with clients across a suite of wholesale products, including lending, debt capital markets, foreign exchange, rates, commodities and trade finance. We bridge the firm’s treasury services and investment bank operations coordinating their offerings and services to clients and identifying opportunities,” Guyett said.
“We have a top-flight investment banking operation in the region, which is clearly an advantage”, he added, and “the broadest possible range of products to offer to our clients”.
Guyett also pointed to J.P. Morgan’s “fortress balance sheet”, and indicated that it is increasingly willing to deploy it for the bank’s clients, for instance by providing bridging finance prior to an initial public offering. For a range of transactions, Guyett said that “J.P. Morgan is simply one of the largest counterparties for a vast number of clients”.
The objectives and limitations of its Asia strategy are well-defined, said Muhammad Aurangzeb, who was appointed CEO of the bank’s global corporate operations for Asia-Pacific earlier this year.
“We aim to serve multinational companies [MNCs] from Europe and the US, and also emerging MNCs, including public sector clients. We are not competing with domestic banks for local business, but focusing on companies with international aspirations.”
“Rapidly increasing intra-Asian trade gives us a tremendous opportunity,” he added. J.P. Morgan has a physical presence in 14 countries in the region and 3,500 existing clients in 60 countries worldwide.
“This means we have close relationships with senior officers at leading companies in every industrial sector. In addition, we have built up local balance sheets and can offer products denominated in domestic currencies,” said Aurangzeb. “And, although we have had these capabilities for a long time, we have made great strides during the past five years, notably establishing six branches in major cities in China.”
Key growth areas are deposit collection for MNCs and trade finance. Indeed, J.P. Morgan’s CFO, Douglas Braunstein, said during the presentation this month of the bank’s 2011 third-quarter earnings that liability balances rose 40% year-on-year to nearly $100 billion, supported by a non-US revenue contribution that was up 16%. Meanwhile, trade loan balances were almost 70% higher year-on-year.
Irrespective of the bank’s current drive to increase resources to its corporate banking platform, the business as a whole is enjoying natural expansion in Asia and other emerging regions, “so J.P. Morgan’s segment is also increasing in volume and value”, said Guyett.
But it clearly intends to grow its business to exceed its existing market share. There are plans to employ more than 300 corporate bankers by the end of 2013, although that goal is likely to be achieved in 2012, said Guyett. In Asia, it currently has 80 in place, and will increase the number to around 100, as well as hiring more lawyers, accountants and IT specialists. About half of its approximately 200 corporate bankers worldwide have moved internally from other J.P. Morgan divisions, and the other half are experienced bankers from other firms.
Ultimately, however, “quality and coordination are our main selling points”, concluded Guyett — although he emphasised that his division “has full accountability”.