Greg Guyett, newly appointed CEO of JPMorgan's global corporate bank

JPMorgan is taking on HSBC and Citi in the corporate banking market. It hopes a joint venture between the investment bank and the transaction bank is the way to do it. Writer Geraldine Lambe

The global corporate banking market is worth at least $100bn a year. This megamarket - in which banks service corporate needs for cash management, payments, foreign exchange (FX), hedging and other financial services - although not as glamorous as investment banking, delivers consistent revenue streams at much lower risk.

So far, the global market is dominated by corporate banking giants Citi and HSBC, whose branch networks span the world and reach into some of the most obscure emerging markets. But earlier this year, another banking behemoth revealed its intention to challenge the incumbents and take a larger bite out of the huge corporate banking pie.

Branching out

In March, JPMorgan announced the creation of a new corporate bank, a joint venture (JV) between its investment bank and its treasury and securities services (TSS) division, where much of JPMorgan's existing corporate banking business sits.

With an initial focus on fast-growing economies such as China, India and Brazil, JPMorgan says that it will invest more than $100m to build out the corporate bank, which will eventually have about 300 dedicated bankers. The corporate bank will also target the key developed markets of Germany, Switzerland and the UK, where it already has clients and believes it can deepen relationships.

The timing of this new effort is telling. JPMorgan has emerged in good shape from the financial crisis with a strong balance sheet, but the US currently accounts for about three-quarters of JPMorgan's revenues and its operations there are exposed to a weak consumer sector. The corporate bank is aimed at geographically diversifying earnings as well as exploiting the weakness of competitors such as Citi that have been badly affected by the crisis.

"This initiative will enable us to balance our growth and grow our non-US revenues, particularly those from emerging markets," says Greg Guyett, newly appointed CEO of JPMorgan's global corporate bank. "It is also an opportune time to build on our existing corporate services because a number of our clients are interested in diversifying their counterparties."

Towards banking nirvana

The new corporate bank's JV structure clearly spells out JPMorgan's desire to reach banking nirvana: that of leveraging the investment banking business off the corporate business and vice versa. It also shows that the TSS division has not been able to achieve that as a standalone business.

In this respect, Mr Guyett's appointment is revealing. While a sizeable chunk of corporate business is carried out by investment bankers - including FX, commodities and derivatives - it is notoriously difficult to get the two cultures of investment and corporate banking working seamlessly together.

Mr Guyett is a career investment banker. He has had roles in real estate banking, mergers and acquisitions and, prior to his most recent role as head of JPMorgan's Japan office since 2007, was head of the global automotive investment banking group based in Chicago. JPMorgan clearly hopes that putting an investment banker at the head of the corporate bank - reporting to Heidi Miller, CEO of TSS and Jes Staley, CEO of the investment bank - will get buy-in from investment bankers and bridge the cultural gap. Influential role

One of Mr Guyett's key roles is to sell internally the advantages for the investment bank in growing the corporate banking presence, particularly in the emerging markets. "A strong corporate bank gives you a bigger footprint and more regular client coverage," he says. "Having corporate bankers focused on day-to-day activities such as cash management, liability management and funding frees up investment bankers to focus on strategic issues with the CEO, but ensures that there is a direct link to treasurers and CFO's for the essential services we offer," he adds.

He is keen to stress that JPMorgan's endeavour is not starting from scratch; this is a new model that builds on a successful - if limited in global terms - corporate business. Mr Guyett also says that if there had been no financial crisis, the corporate bank may have arrived a little sooner.

"TSS is already a leader in servicing financial firms globally. Over the past five years, it has invested heavily in building out those services and product capabilities for global corporates and has already won significant business. This JV just puts in place the structure and leadership to accelerate that growth. We are now comfortable about using our balance sheet to grow this business significantly," he says.

Aiming high

Insiders say that JPMorgan is aiming for 10% to 15% of the global corporate banking market. The bank certainly has the financial clout to build out the corporate bank and the venture has support from the top: group CEO Jamie Dimon believes it is the best route for the group's global expansion. The wholesale bank's balance sheet is about $100bn, but Mr Guyett says that he is unable to say how much of that will be allocated to the corporate bank.

"I don't want to put a figure on how much balance sheet we will be able to deploy. This will depend on how quickly we can grow corporate relationships and the economic background at the time. What I can say is that there are great opportunities to grow the business globally; to equal what we have already done in the US where we have double-digit market share in many areas of corporate business such as flow, derivatives operating services, FX, etc," he says. "We have excellent credibility in the investment bank and TSS, and we are in a strong position to build on that to win more of the international banking business for our existing clients, as well as to win new clients," he adds.

Attracting talent

There is still a lot of building to do. The corporate bank has about 100 bankers, with a view to adding 200 more. Recruitment will be a challenge, not least because JPMorgan is looking for high-calibre corporate bankers who are comfortable operating in a global architecture and with a global client base, and who are extremely credit savvy. In-country, they are looking for bankers who cover the kind of large subsidiaries at the local level that will value the products JPMorgan has to offer.

This will be no mean feat, and Mr Guyett admits that being able to find the right bankers is something that keeps him awake at night. "We are looking for very sophisticated bankers to add to our existing team who can manage the client relationship, manage the balance sheet and who also understand credit," he says.

Serious competition

There will be other challenges. For one thing, JPMorgan is not alone in seeking to expand in this huge marketplace - or in appointing an investment banker to oversee the job. Bank of America Merrill Lynch (BAML), for example, has also announced plans to beef up its corporate offering, appointing seasoned investment banker Paul Donofrio as head of the company's global corporate banking business, reporting into Tom Montag, the former Goldman Sachs veteran who is now president of BAML's global banks and markets.

In the US, BAML has a corporate rolodex to beat all others. It may lack an international corporate banking business, but simply converting some US banking relationships into international ones would be a powerful start.

Equally, Citi may have been badly damaged by the financial crisis, but it remains a force to be reckoned with in terms of corporate banking. It has the biggest branch network in the world and its longevity in many of the 140 countries in which it operates means that corporate relationships will be hard to challenge.

A unique opportunity

Mr Guyett says that JPMorgan is not trying to emulate Citi's network, but he does believe that JPMorgan has a unique opportunity in the aftermath of the credit crisis. "We don't need to be in every single city or in every single country in order to serve our clients well," he says.

"We are in 60 countries already and will continue to open new offices where they are needed - for example, we recently opened two new branches in China and in Saudi Arabia - but the bulk of our investment has been in building out the product and service capability, and we have done that. More importantly, the credit crisis demonstrated the wisdom of having multiple providers for critical products and services, and clients have demonstrated that they are keen to do business with JPMorgan."

JPMorgan is in it for the long haul, says Mr Guyett. "This is a multi-year process. It will take two or three years to get where we want to be."

Career history

Greg Guyett

2009 - Appointed CEO, global corporate bank.

2007 - Appointed president and CEO, JPMorgan Securities Japan, and senior country officer, Japan.

2001 - Promoted to head of the global automotive group at JPMorgan.

1998 - Head of capital goods sector, based in Chicago.

1994 - Managing director, mergers and acquisitions.

1991 - Vice-president, Real Estate Investment Banking, New York.

1990 - Vice-president, Real Estate Investment Banking, Tokyo and London.

1985 - Joined Real Estate Investment Banking, New York after graduating from Princeton University.

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