JPMorgan's head of Europe, the Middle East and Africa explains to Edward Russell-Walling how a focus on scale and diversification has kept the bank consistently at the top of numerous rankings, and how it plans to take on today’s tech and geopolitical challenges. 

Viswas Raghavan

Viswas Raghavan

JPMorgan has been the market-leading investment bank in Europe, the Middle East and Africa (EMEA) for the past five years in a row and has built a successful regional corporate bank over the past 10. So what is the strategy now? To defend its position by all means possible and to guard against complacency, according to Viswas Raghavan, the bank’s CEO for EMEA.

Mr Raghavan became regional CEO in 2017, having been head of banking for JPMorgan’s corporate and investment bank in EMEA – a post he still holds – since 2012.

He joined the bank in 2000 from Lehman Brothers, where he was head of equity-linked capital markets for Europe and Asia. He was made head of JPMorgan's debt and equity capital markets for Europe and Asia, then head of global equity capital markets. To this day, he insists that his office sits alongside the trading floor.

Number one in EMEA

Having been an investment banker for most of his working life, Mr Raghavan clearly derives great satisfaction from JPMorgan's investment banking performance. Dealogic investment banking figures show JPMorgan ranking as being either first or second in EMEA every year since 2001.

Indeed, it has been number one every year since 2014 – with Goldman Sachs in second spot annually since 2015 – and is on course to retain this position in 2019. No other bank has held the number one position in EMEA for such an extended period, and the gap between first and second place has been widening. In most years between 2001 and 2015 the gap in market share between the banks placed one and two was below 1% of the total. In 2016, it widened to 1.2%, and then 2.2% in 2017, before easing back to 1.6% in 2018. 

Mr Raghavan was part of the bank's successful drive into European corporate banking, which began in 2010. “This extended the JPMorgan offering beyond periodic strategic conversations around debt, equity, and mergers and acquisitions [M&A], and brought it into everyday discussions with corporates and governments, particularly about transaction banking needs including treasury services and cash management,” he says.

This organic build-out to complement investment banking is now a done deal. “In fact, it's an exceptionally well done deal,” says Mr Raghavan. “Corporate banking is now a fully fledged machine in terms of product offering and scope, and fully integrated within the banking team.”

The bank as a whole continues to widen the sweep of its corporate net. JPMorgan’s commercial bank, which has traditionally served US-based mid-market companies, recently announced it would target the mid-market – particularly those with global ambitions – in European and Asian countries where JPMorgan already has a meaningful presence.

Pervasive influences

Today there are two particularly powerful influences across the global business landscape, says Mr Raghavan. The first is macroeconomic events. “We have never seen geopolitical events drive sentiment as they do today – be they trade wars, Brexit, the mood in Hong Kong or interest rates globally,” he adds.

The other is technology, especially what Mr Raghavan calls “electronification”. This is something he understands at least as well as any other banker: he holds a BSc in physics from the University of Bombay and a BSc honours in electronic engineering and computer science from Aston University in Birmingham, UK. “The industry is dramatically changing, thanks to the sheer pace of electronification,” says Mr Raghavan, highlighting that more than 95% of trades in both equities and foreign exchange are now electronic, with the rest of fixed income heading the same way.

Another manifestation of this change is the fact that payments has become 'the new frontier', a fragmented market in which giants such as Amazon, Google, Alibaba and the credit card majors are battling for customers. Technology has a “massive” influence in everything the bank does, in all the verticals, says Mr Raghavan. JPMorgan's tech spend is $11.5bn firmwide, with some $700m a year going on cyber security.

Cyber security is an area of competitive advantage for the bank, according to Mr Raghavan. “Clients want a robust counterparty. The pipes are all connected and their defences are only as good as the bank's defences. Our significant investment in cyber ensures that we can protect the whole system and spot any attempted breaches, either to us or our clients,” he says.

Competition is alive and well, Mr Raghavan acknowledges. “It's incredibly strong,” he says. “There are no longer the same competitors in everything, but there are outstanding competitors in every vertical asset class and country.” 

Comprehensive offering

As European investment banks have pulled in their horns, withdrawing from selected businesses or geographies in the wake of the financial crisis, they have left EMEA's full-service field largely to the Americans. Each bank shines particularly brightly in one or two products – for example, equities for Morgan Stanley, credit for Bank of America, rates for Citi and M&A for Goldman Sachs. Only JPMorgan is at or near the top across most of them, however, which may explain why its market cap exceeds those of its nearest US competitors by more than assets or earnings would imply.

In The Banker’s Top 1000 World Bank rankings for 2019, JPMorgan Chase finishes second in the world after Goldman Sachs in trading income, fourth after the three Chinese giants in net interest income, and first by fee and commission income. “What is the model to succeed in a world of rapid electronification and diminishing margins, with rising costs of business? You need four pillars. They are scale, completeness, diversification and being global,” says Mr Raghavan.

Scale means delivering any product, wherever the client wants it. Completeness means being best in class, with a superlative offering in each of those products. Diversification allows the bank to survive the fickleness of individual markets, and enables investment in good times and in bad. And being global is necessary because the clients are global.

Mr Raghavan attributes his bank’s current state of health to other factors too, including keeping a level head after the financial crisis. “There’s discipline, execution and a drive to systematically defend and protect what we do well,” he says. JPMorgan invests in new things that drive competitive advantage, such as technology, he adds. It stays ahead of the game in capital (group chairman and CEO Jamie Dimon’s famous “fortress balance sheet") and liquidity, and investing in “best-in-class outcomes”.

This is all very well, but investment banking in general seems in decline, with 2019 first-half revenues at a 13-year low, while business and the economy are struggling in Europe. Mr Raghavan does not consider this as anything new, however. “After the [2008] crisis we had a series of macro melodramas such as in Greece and Italy. But Europe has emerged intact post-crisis,” he says.

He agrees that investment banking fees are “moribund” this year, one of the weakest for some time, thanks to headwinds such as Brexit and the yield curve, and Mr Raghavan is not optimistic that the EMEA market is about to grow dramatically. “It looks likely to be flat to down. The risk to the downside is more dramatic than any surprise to the upside. Fees will be anaemic for everybody for some time,” he says.

Bigger slice

Mr Raghavan does not quantify JPMorgan's EMEA earnings though he says they have been “pretty consistent”. He argues, however, that the important issue under present circumstances is less about wallet growth and more about taking a bigger slice of a shrinking pie. And he points once again to the clear blue water between JPMorgan and the rest of the pack.

Continuing success is partly predicated on continuity in people, he says, adding: “We have had no crazy headcount reductions. That's good for morale, and clients love continuity.” And in The Banker Top 1000 World Banks tables, JPMorgan Chase is the only US bank to feature in top 10 rises in employee numbers – 2015 to 2019, having added 12,963 people, while Citi and Bank of America both feature in the corresponding top 10 falls table, alongside Barclays, RBS and HSBC.

The bank has pockets of weakness, including countries where it is not number one. In treasury services, JPMorgan has a dominant position among financial institutions but could do better with corporates. There may be room to grow in prime brokerage and in cash management, meanwhile.

“As the world transforms, are we still going to be number one?” Mr Raghavan ponders. “We are doing all we can to retain our place. But we must guard against complacency and an entitlement culture.” To think “we are the mighty JPMorgan and it will always be this way” would be very detrimental, he adds. "We need to put the client front and centre, and keep earning the business every day for all the right reasons.”

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