JPMorgan’s ‘Jamie premium’ to be tested as CEO succession looms

NEW YORK : Questions hang over who will succeed JPMorgan Chase CEO Jamie Dimon and when, but analysts and investors say one thing is almost certain: the bank’s stock will slump when the powerful bank chief eventually departs.
JPMorgan shares reflect a so-called “Jamie premium” of 10 per cent to 15 per cent that could evaporate when the longest-running chief of a major Wall Street bank decides to leave, according to estimates from four investors and three analysts.
A 15 per cent figure translates to almost $90 billion in market capitalization as of Friday’s closing price.
JPMorgan declined to comment.
“The premium will also depend on how the succession happens,” said Walter Todd, chief investment officer at Greenwood Capital Associates, which manages $1.7 billion in assets, including JPMorgan shares. “If it is unexpectedly, then it could be the tune of 10 per cent or more… If it is a more well-thought out, gradual plan, then the premium could be lower.”
Analysts and investors say the “Jamie premium” has grown in recent years, helped by the bank’s steady performance and its lack of major regulatory problems. It is also believed to be higher than those commanded by his peers, three investors said.
Earlier this year, Dimon announced that his timeline for stepping down is no longer five years and could be as soon as two-and-a-half years, putting the spotlight on succession. Focus on the issue has also grown after Dimon had cancer in 2014 and emergency heart surgery in 2020.
JPMorgan Chase’s board and CEO are focused on succession planning, spending a lot of time thinking about what happens after he retires.
“We’ll do the right thing,” Dimon told investors at a conference this month. “It’s the last and most important thing I’ll ever deal with, and we all want to get that exactly right.”
Dimon has run JPMorgan for 18 years and is one of the most influential figures in corporate America. The 68-year-old is seen as a key force behind its record profits, market share gains and performance that consistently beats rivals.
Under his leadership, JPMorgan became the largest bank in the U.S. by assets in 2008 when it bought Washington Mutual, once the nation’s largest savings and loan institution, during the global financial crisis.
Dimon is also the only bank CEO among the six largest U.S. lenders to have been at the helm during that crisis.
When last year’s regional banking turmoil threatened to destabilize the industry, Dimon acquired First Republic and made the nation’s biggest lender even bigger.
‘AVOID SUCH DRAMA’
Born to a Greek family in the New York borough of Queens, Dimon earned his bachelor’s degree from Tufts University and an MBA from Harvard Business School.
Under the tutelage of former Citigroup CEO Sandy Weill, Dimon cemented his reputation as a savvy operator and strict cost-cutter while working at various institutions. Weill later ousted his protégé from Citi after the men clashed, and Dimon struck out on his own. He later became the CEO of Bank One.
Dimon often warns JPMorgan executives against the dangers of complacency and pushes them to excel, five executives said privately. He has also emphasized the importance of succession planning.
“Poor CEO succession has destroyed many a company,” Dimon wrote in a letter to shareholders published in 2010.
“CEO and management succession often seems more like a psychological drama or a Shakespearean tragedy than the reasoned and mature process it should be,” he wrote at the time. “It is in our best interest to avoid such drama.”
As the Nov. 5 presidential election nears, Dimon has been floated for senior positions on U.S. economic policy, such as Treasury secretary. He was praised by former president Donald Trump and spoke with Vice President Kamala Harris earlier this month. Despite opining on what qualities the next president should possess, Dimon has not publicly endorsed either candidate.
JPMorgan plans to split the CEO and chairman jobs, currently held by Dimon, after he eventually steps down, according to its proxy statement.
The board could line up an executive chairman role for Dimon, echoing a move by Morgan Stanley to retain former chief James Gorman during Ted Pick’s first year as CEO.
Some analysts expect Dimon to stay at the helm until 2026, when he stands to gain a retention award of 1.5 million options in the form of stock appreciation rights.
After a two-decade run as “probably the most well-regarded bank chief… (2026) could be seen as a reasonable time to pass the baton,” said Brian Mulberry, client portfolio manager at Zacks Investment Management.
‘DEEP BENCH’
Dimon has cited a cadre of “extremely qualified” executives who are prepared to run the lender once he leaves.
Directors have identified Jennifer Piepszak and Troy Rohrbaugh, co-CEOs of its commercial and investment bank, and Marianne Lake, CEO of consumer and community banking as potential contenders for the top job. Mary Erdoes, who heads the asset and wealth management businesses, is also in the running.
The bank’s president, Daniel Pinto, “could run the bank tomorrow,” Dimon has also said.
“The market has often touted Lake and Piepszak as frontrunners and they are both very well regarded by the investment community,” HSBC analyst Saul Martinez said. Both women have served as finance chief at the bank.
Indeed, JPMorgan could be the next major U.S. bank to have a woman CEO after Citigroup in 2021 became the first to do so when it appointed CEO Jane Fraser.
JPMorgan has sought to build diversity in its ranks for decades, even though it says gender has not been a specific factor in CEO selection.
“The bank has a deep bench and the potential CEOs are all very competent” because they have run its businesses, said Macrae Sykes, a portfolio manager at Gabelli Funds, which owns JPMorgan stock. “But it is possible that the board could consider an outsider.”
Still, Dimon’s departure will cast a long shadow.
Sykes cited Apple co-founder Steve Jobs as an example of a company whose success is closely tied to a key figure. Apple’s stock fell after Jobs’ death because he was seen as instrumental to its success.
“Investors knew that Jobs was unwell and the stock did react… but since then, and under the new management, it has been on an upward trajectory as the upheaval settled,” he added.
Analysts have also compared Dimon’s leadership to that of Warren Buffett, the 94-year-old billionaire chief of Berkshire Hathaway, because both leaders are so closely identified with the success of their companies.
Indeed JPMorgan’s fortunes have surged under his leadership – its profit jumped to a record in the second quarter after it brought in its highest-ever annual earnings last year.
The stock has climbed almost 24 per cent so far in 2024, outperforming an index of broader U.S. bank shares that rose nearly 19 per cent.
The lender raised its outlook for net interest income – or the difference between what it earns on loans and pays out on deposits – this year, and also boosted its dividend. It will report third-quarter earnings on Oct. 11.