Dimon Steps Up

By Gregory S. Davis | December 21, 2005 AAA

J.P. Morgan Chase's (JPM) president, Jamie Dimon, will succeed current CEO, William Harrison, on December 31. The move was originally scheduled to take place in July of 2006. The announcement came at the beginning of J.P. Morgan's 3rd quarter conference call this past October. William's felt the time was right and that the following merger and business continuity goals had been achieved. Including:

1. Outstanding integration of Bank One
2. A smooth transition from CEO Harrison to President Dimon
3. J.P. Morgan strategic positioning

Williams went on to say that "Jamie is the best person to realize and maximize this potential".

J.P. Morgan Chase, the 2nd largest bank in the US based on assets, bought Bank One for $58 billion in 2004. J.P. Morgan Chase acquired Bank One in 2004 in a move to temper its strong investment banking business revenue with Bank One's smooth fee based income from its strong retail franchise built by Dimon. Wall Street has been eagerly anticipating Dimon's move to the forefront of J.P. Morgan Chase ever since his departure from Citigroup (C) and New York City in 1998.

Jamie Dimon, the former CEO of Bank One, earned his stripes while serving as Sandy Weill's, Citigroup's Chairman, apprentice for 16 years. Sandy and Dimon began their relationship at American Express (AXP) in the early 80's. Weill had the management experience and the foresight to recognize the power of consolidating financial institutions. Dimon was the nuts and bolts analysts who knew how to analyze a companies worth and explain those findings charismatically.

The two went on to leave American Express and work on deals that would eventually combine Shearson, Smith Barney, Salmon Bros and the Travelers Corp. Trouble arose when Weill's daughter, Jessica Bibliowicz, the head of Smith Barney's mutual fund unit at the time, was denied a position on Smith Barney's planning committee by Dimon. Bibliowicz left Smith Barney 5 months later and became CEO of National Financial Partners Corp (NFP). Dimon's decision created a crack in his relationship with Weill.

The following year Weill and Dimon put their differences aside and worked on creating the first "universal bank" with the purchase of Citigroup in 1998. By November of the same year Dimon was asked to resign for ongoing friction between himself and the CEO of Salmon and the apparent failure on his part to promote Bibliowicz. Jamie resurfaced 18 months later as the CEO of Bank One in Chicago while Weill continued on at Citigroup.

Weill who is now 72, is set to step down as Chairman of Citigroup in April of 2006. A clause in his agreement prevents him from starting a venture that may compete with Citigroup for a 10 year period. Sources close to Weill, including Citigroup CEO Charles Prince, believe that his future pursuits will be more philanthropic than capitalistic.

The 49 year old Dimon is excited about the continued integration of Bank One's systems, accounts and customers into J.P. Morgan Chase. In July of 2005 Dimon alarmed investors by hinting about J.P. Morgan's desire to grow through acquisitions beginning in the early part of 2006. As a sign of strength J.P. Morgan's third quarter resulted in a record $15 billion dollars in revenue up 15% from the same time period a year ago. J.P. Morgan's earnings came in at $2.7 billion with investment banking contributing $1.1 billion or 40% to the total.

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Since the third quarter results issued on October 19th J.P. Morgan's stock price has moved up from the $33 dollar range to be within striking distance of $40 which would be a new 52-week high. With an appreciating stock price and Dimon's past experience with orchestrating mega-deals it's not a matter of how will J.P. Morgan grow, it is more a question of with whom.

What can we expect to see in the future:
1. Re-branding of Bank One locations to the J.P. Morgan Chase brand
2. Expansion of J.P. Morgan Chase branches
3. Growth through acquisitions of regional banks

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