JPMorgan is not a fairweather friend, says Jamie Dimon


Mumbai: Jamie Dimon,chief executive officer of JPMorgan Chase and Co., the second-largest US bank by market value, is mightily impressed with the growth of Indian companies—their sophistication, improved governance and globalization.
In an interview on Friday, Dimon said the bank’s India operations are almost as big as Italy and Spain combined and, in investment and corporate banking, India will be growing a lot faster than the developed nations. Edited excerpts:
JPMorgan came here even before India’s independence, but in past 67 years, you continue to have a single branch despite seeing enormous opportunities in Asia’s third-largest economy.
JPMorgan is not a retail company. It’s a wholesale bank. We serve corporate clients, sovereign entities and we want more branches. We have actually asked the regulator for more branches to serve our clients and the decision rests with them. In the meantime, we have grown our business a lot in India. When I first got to JPMorgan Chase, I remember we were based in a building downtown—we had two small floors, only had a handful of people and the global service centre was just opening. We were doing research on some 30-odd Indian companies; we had investment banking and a little fixed income and an equity operation.
Now in India, we do research on about 130 to 140 companies and that research is used around the world by people who want to know about Indian companies. We help Indian companies in India and also in the outside world. Multinationals from around the world are banked here. There are a lot of services and functions performed here which are performed for the whole world.
Given a choice, how many branches would you like to have?
We have, earlier in the year, made an application to the RBI (Reserve Bank of India) for six branches, which is in a combination of urban cities and under-banked areas. We are waiting for permissions and there are some local requirements in terms of adding some basic products to our offering, including individual accounts and opening branches in under-banked centres, which we are working to comply with.
You are predominantly a corporate banker, but your other businesses such as asset management and brokerage are not very big. Is there any plan to push them?
We manage $2.3 billion in assets here. I think that’s grown three or fourfold since I first got to JPMorgan Chase. That’s mostly fixed income but there is equity and some real estate assets. I know that a lot of people are talking about the slowdown is India’s growth— from an average of 9% to about 4% or 5%, but a 4% or 5% growth rate is not that bad. India is going to grow because the population is growing, the businesses are growing. The economy may go up and down but the number of clients we serve in India will grow quite a bit in the next 10-20 years. So, we are looking at how many clients we are going to cover and what kind of services they will need from us. The economy will have its ups and downs but it’s not going to distract us from trying to build up the business.
Outside the US, JPMorgan does not have any retail operations, but India is one market where everyone sees a big opportunity for retail.
True, but becoming a full-service retail bank in India is not for us. Competition is a hard thing. If I think we could come to India and open 50 branches in Mumbai, we would be destroyed by State Bank of India, ICICI Bank and HDFC Bank because they are already strong and powerful here. We would not get enough market share to pay for all the costs—not just the local branch costs but other overheads. Conversely, ICICI Bank would probably have a hard time coming to New York city and doing it there. We can’t do it right now—it’s too late. You could say maybe one day we could buy something—I wouldn’t rule that out. But (now) we can’t even buy more than 4.9% (stake) in a bank in India and so for us buying something now is out of the question. Some of the folks who have a retail network started building it a long time ago, like Citi. It’s too late now but things may change and maybe if the laws change we might be able to buy.
You have very strong link with the Tatas. Ratan Tata is on your advisory board. What’s your outlook on Indian corporations?
Look at the growth of Indian companies—the sophistication, the improved governance, the globalization… You have had a lot of companies going overseas and I think it’s just the beginning of this globalization trend. You may have short-term ups and downs but that’s not going to stop the Tatas from buying JLR (Jaguar Land Rover). So I think they are going to continue to grow around the world like that and we have to follow our clients to support them. When our clients go to certain countries, we may need to be there too sometimes.
So you continue to remain bullish on India?
How much have you invested in India?
The balance sheet here is about $14 billion credit and $1 billion of capital now. This will grow over time as we accommodate client needs. We also bank Indian companies when they go overseas. We couldn’t do that if we weren’t here. When I travel in America, people say you guys are building in India, what about here? I say when we are building in India, we are building for you too. I don’t know if you know, but we bank over 300 multinationals, non-Indian companies in India.
What’s India’s contribution in your balance sheet?
It’s almost as big as Italy and Spain combined. In investment and corporate banking, India is going to be growing a lot faster than the developed nations. A lot of our revenue are coming from developed markets but emerging and developing markets are going to be more and more. In the corporate and investment banking business, 50% is non-US and that’s going to grow faster than (the) US. The fastest growing parts are going to be emerging markets like India, Indonesia, China and greater China, Mexico, parts of Latin America.
Is the slowdown in India temporary?
I am not an economist and I can’t really forecast the future. How many companies do you think will be in the size and scope which need JPMorgan to bank them 15 to 20 years from now? I will tell you it’s going to be three times as many. I don’t exactly know what path it’s going to take but these companies have global ambitions; they have got great technology and global skills. They are strong in some areas than in others and the growth rate of may be a lot more than American companies.
The Indian central bank seems to have failed to contain inflation despite 13 rate hikes. As a banker, what’s your take?
I will have to analyse it more to have an intelligent position on that. I hear all the things you just said, but I don’t know enough and someone told me today that a lot of inflation is coming from products you buy overseas—mostly oil, gas and coal—so that’s a slightly different kind of inflation than local inflation.
In a recent speech at the Council of Foreign Relations, you said, “I am not worried about JPMorgan, I am worried about the US.” What does that mean?
That comment was related to our fiscal cliff. We need in America, good long-term fiscal policies and so does every nation. I think that nations have to think about what is a good policy that enhances growth and competitiveness and we need that in America too. I was answering a question about what the policy is… JPMorgan will do fine even if we hit the fiscal cliff. We are prepared for tough times; we have no choice. But it’s a terrible thing for the US. So I am saying let’s do what we need to in order to stop this from happening—not because it’s good for JPMorgan but because it’s good for the people of the country.
You also said you formed a fiscal cliff war room.
That was a bit of an overstatement. We do have a little bit of a war room. We did it for the euro zone crisis and we do it for other crises. The war room is every department—legal, credit, risk, compliance, bankers, audit, knowing what they need to do when crisis hits. We are just starting that process for the fiscal cliff. It’s not going to be the same kind of thing because this one is more how it affects the clients. So we have this effort underway, but we don’t have a physical war room.
You are worried about the US and staying put in Spain and Italy for the long term. Does that mean your outlook on Europe is better than on the US?
Those statements weren’t an outlook, I was making a statement about our policy. The US, despite the fiscal cliff, is still one of the best economies in the world—and one of the best investment destinations. We shouldn’t create a short-term problem that could be painful for America. It’s a great place to do business. I wasn’t comparing it with Italy and Spain. What I was saying about Italy and Spain is that it’s very easy for people to say, “well, you are taking too much risk”. If really bad stuff happens we can lose $5 billion and, if that happens, I am going to get a lot of questions from the analysts. But JPMorgan is not, cannot, and will not be a fairweather friend. It’s true for Italy and Spain; it’s true for the US; it’s true for India.
We want to be there in good times and bad. You can’t just kind of run in and out of a country. Our investments are in people, training, systems, relationships and all these take a long time. I was using Italy and Spain as an example… We are doing business there for over 100 years and we are not going to just cut and run. We will manage the risk and do the right thing.
Where will JPMorgan be in India in next five years?
I don’t know about the global service centre but the coverage of clients will double. When you are doubling clients, you are doubling capital, doubling all supports like credit, risk, HR (human resources), legal, systems, operations, research. It’s a big effort. If we are covering approximately 130 (companies) today, we will hopefully be covering 250 in five years, and 500 in 12 years. In the US, we cover something like 3,000 corporations and there is a chance—if you want to dream a little bit—that in 30 or 40 years, we will be covering 3,000 corporations in India.
Is there anything that worries you in India? The fiscal situation? High inflation?
We have to deal with those anywhere we are. The governments around the world need good policy to drive good growth. Brazil and Singapore have done that. You have seen what bad policies have done to Greece, Cuba and a whole lot of other countries.
Doesn’t the fiscal situation in India worry you?
Not really. But I think in terms of the business, people here want good policies; they want to be able to grow and to expand. There are more complaints about the bureaucracy here than the fiscal policy. In the US, there are more complaints about the fiscal policy.

About the author

Leave a Reply

Your email address will not be published. Required fields are marked *