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JPMorgan is planning to hire for its midsize banking push abroad
[NEW YORK] JPMorgan Chase & Co is seeking to do more business with midsize companies abroad, expanding in a market that's traditionally dominated by local banks, according to people briefed on the matter.
The company is planning to hire bankers in Mexico, France, Spain and the UK to build out teams for its commercial bank, which has typically focused on US companies, said one of the people, who asked not to be identified because the plans are private. The goal is to deepen relationships with non-US companies in their home cities and help them expand globally, the people said.
The shift builds on an international strategy first devised by Todd Maclin, the former chief executive officer of JPMorgan's commercial bank, which offers deal advice, treasury services and lending to companies that make up to US$2 billion in revenue. Mr Maclin created a team in 2005 to help medium-sized US companies establish subsidiaries around the world. Led by Morgan McGrath, the international bankers have historically only covered the local subsidiaries of US companies abroad and not the foreign firms in those areas, one person said.
As part of the new push, JPMorgan hired Rafael Calderon from Barclays Plc last month to lead corporate-client banking in Mexico, one of the people said. Mr Calderon is building a team to assist in covering companies that are too small to work with JPMorgan's investment bank, the person said.
The bank is seeking to emulate the Mexico model in some European countries, though the efforts are preliminary, said the people, citing internal discussions. It may also look to eventually expand in Asia, depending on how successful the strategy is elsewhere, the person said. In some cases, companies that had been covered by the investment bank will be moved to the commercial bank.
JPMorgan is muscling into a space long dominated by local banks that have deep relationships with companies in their home countries, such as Banco Bilbao Vizcaya Argentaria SA and Banco Santander SA in Spain. The challenge will be poaching those clients that typically generate between US$500 million and US$2 billion in revenue.
The investment bank has long held an international presence with large multinationals but hasn't focused as much on smaller, local companies.
"It makes sense to export their advisory and treasury-services overseas," said Charles Peabody, a banking analyst at Portales Partners. "Corporate services are easier to export and you have a more sophisticated clientele. If you go back to history of this organisation - Chase Manhattan was a visible name domestically whereas JPMorgan was a visible name internationally with the large corporates."
A spokeswoman for JPMorgan declined to comment.
JPMorgan's move to bolster its banking presence comes as a number of global banks have been shrinking their overseas businesses in an effort to cut costs and reduce risks from sprawling operations. Earlier this year HSBC Holdings Plc, which used to call itself the "world's local bank", was said to be evaluating whether to exit as many as a quarter of the 67 countries it operates in.
Deutsche Bank AG is in the process of selling its operations in Mexico, while Citigroup Inc announced plans to sell its retail-banking businesses in Brazil and Argentina in 2016.
The commercial bank has been a key ingredient in JPMorgan's growth over the past few years, with revenue expanding 26 per cent since Doug Petno took over as CEO of the unit in 2012. That compares with a 2.7 per cent expansion in the firm's overall revenue during that period.
"It's been an interesting business because it's been one of the smallest contributors to the bottom line but one of the fastest growing parts of the bank," Mr Peabody said.
International banking contributed about 4 per cent of the commercial bank's US$8.6 billion of revenue last year, regulatory filings show. JPMorgan is aiming to generate annual international revenue of US$500 million in the commercial bank in the next five years, according to guidance in its most recent investor day presentation from February.
While the unit gets most of its domestic revenue from lending, its business abroad relies more on fees related to treasury services - helping corporate clients manage their money and payments, one of the people said. Advisory fees contribute less than 10 per cent of revenue, the person said.