JP Morgan Chase employees were left in little doubt about how damaging the UK’s Brexit vote could be.
In early June, chairman and chief executive Jamie Dimon spoke to staff in Bournemouth alongside now-former chancellor George Osborne and warned that a vote to leave the European Union could lead to as many as 4,000 job losses from a UK headcount of 16,000.
Two months on, and with the shock of a Brexit vote having sunk in, the bank has become slightly more optimistic. Or maybe that’s just Viswas (Vis) Raghavan, JP Morgan’s deputy chief executive in the Europe, Middle East and Africa (EMEA) region.
“I’m always glass half full,” he says. “The intent is there to make this a success now, and that’s really what everybody should aim for. Where we are is where we are. That’s the call that was made, and we need to now have a very ambitious vision for what Britain looks like.”
Raghavan, who is also head of banking across EMEA, stresses that it is too early to know what Brexit means and therefore how it will affect the bank’s future – whether 4,000 jobs will be shifted away from the UK, or none at all.
“It’s really premature to trigger any contingency plan because you cannot know yet what you are solving for,” he says, declining to provide details of best and worst-case scenarios. “And you may end up causing a lot of unnecessary disruption to people.”
But he makes it clear JP Morgan will do what it needs to do. “The way we manage our business is around our clients. We will service and look to continue doing business with them wherever they are located, just like we always have. So our model will reflect what the rules look like, what our clients do and then we’ll adapt to make sure that the business continues effectively. But I think at the heart of it is the intention to preserve the integrity and fabric of what we have, this pretty sizeable presence in the UK.”
Raghavan emphasises JP Morgan’s dedication to London, as well as his own affection for the capital.
“I adore this city,” he says, speaking to City A.M. from JP Morgan’s Victoria Embankment office, a converted City of London School building that retains many of its original features – including a stained-glass-windowed “great hall” (pictured below).
“We will absolutely look to preserve the bulk of the fabric of what we have, within whatever rules are presented to us,” he says. “This [our UK business] has been built over a long time, and the intent is to maintain a large presence here.”
Raghavan adds: “I think the time has gone now where you’re either a Remainer or a Brexiter. The result is known, end of story. So now let us move forward constructively and make it as successful as possible.”
Brexit boost for M&A
While the Brexit vote – which was opposed by not just JP Morgan, but Goldman Sachs, Morgan Stanley, Citigroup and others – has been widely viewed as a negative for banks operating in the UK, one positive to emerge so far has been an apparent uplift in mergers and acquisitions (M&A) activity.
A £24.3bn deal for Japan’s SoftBank to take over UK chip maker Arm sparked the suggestion that, with the post-Brexit pound falling against the dollar, British firms could attract more foreign investment interest.
JP Morgan hasn’t had a quiet time in terms of M&A since the referendum, working on: British turnaround firm Melrose’s takeover of US air conditioning company Nortek; South African conglomerate Steinhoff’s £597m deal for Poundland; and Unilever’s acquisition of Dollar Shave Club.
And there’s even more going on behind the scenes, says Raghavan.
“We are seeing exceptional levels of engagement in the M&A space – both inbound and outbound enquiries,” he says. “There is a lot of M&A activity cooking, and that level of strategic dialogue is as strong as ever. There is inward investment interest in UK companies on the back of the weaker currency but also the need for banks to help their clients ward off unwanted approaches too.
“So clearly there is interest in the UK inbound, but also a lot of interest by UK companies looking to diversify, so that they get multi-currency earnings to diminish their single country exposure.”
Optimistic, but realistic
But JP Morgan’s resident optimist is also realistic, and cautious. M&A isn’t everything. And he ranks Brexit alongside the US election and world terrorism atrocities as the big threats currently facing the global economy.
“You cannot just say: ‘M&A is doing great!’ as the wider capital markets are clearly strained, however M&A does drive activity overall,” he says.
"Capital markets are down 30 to 40 per cent this year across the industry – so volumes in leverage finance, in high-grade [bonds], in ECM [equity capital markets], the IPO [initial public offerings] pipeline. So, yes, there’s a lot of strategic dialogue, but the capital markets have been slow compared to M&A."
Raghavan says: “It’s important that everybody doesn’t get into a false sense of security that Brexit has happened and it’s all okay."
He adds: “I’m sure we’ll get to where we want to get to. The question is: what is the path ahead?”
Raghavan jokes that a clear path for Brexit should emerge, hopefully, during his lifetime, but even on this subject – Westminster's political antics and sclerotic pace of change – he strikes an upbeat tone, noting that new Prime Minister Theresa May came to power a couple of months ahead of City expectations.
"Britain has been a role model of free markets for centuries," he stresses, returning to the broader picture. "London remains a good place for business because of its whole connected ecosystem – it’s about trust, fairness, the rule of law, achieving on merit and attracting the brightest and the best. On that, it has always scored well."
Despite the lingering uncertainties, it sounds as if Brexit has failed to dampen the mood of JP Morgan's positive-thinking Anglophile.