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

By Nupur Anand

NEW YORK (Reuters) – 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 shares will fall when the bank’s powerful boss leaves in the follow.

JPMorgan shares reflect a so-called “Jamie premium” of 10 percent to 15 percent that could evaporate when the longest-serving head of a major Wall Street bank decides to leave, according to estimates by four investors and three analysts.

A 15% figure translates to a market capitalization of nearly $90 billion at 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’s unexpected, then it could be a 10% song or more… If it’s a more 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 consistent performance and its lack of major regulatory problems. It is also believed to be higher than those ordered by its peers, three investors said.

Earlier this year, Dimon announced that his term for stepping down was no longer five years and could be as soon as two and a half years, putting the spotlight on succession. The focus on the issue also increased 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 they retire.

“We’re going to do the right thing,” Dimon told investors on a conference call this month. “It’s the last and most important thing I’ll ever deal with, and we all want to do just that.”

Dimon has led 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 U.S. bank 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 US lenders to have been at the helm during that crisis.

When regional banking turmoil last year threatened to destabilize the industry, Dimon acquired First Republic and made the nation’s largest lender even bigger.

The story continues

“AVOID SUCH DRAMA”

Born to a Greek family in the borough of Queens, New York, Dimon earned his BA from Tufts University and an MBA from Harvard Business School.

Under the tutelage of former Citigroup CEO Sandy Weill, Dimon built his reputation as a shrewd operator and strict cost-cutter while working at various institutions. Weill later removed his protégé from Citi after the men clashed, and Dimon went it alone. 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 also stressed the importance of succession planning.

“Poor CEO succession has destroyed many companies,” Dimon wrote in a 2010 letter to shareholders.

“CEO and management succession often feels more like a psychological drama or a Shakespearean tragedy than the rational, mature process it should be,” he wrote at the time. “It is in our interest to avoid such a drama.”

As the Nov. 5 presidential election nears, Dimon has been tipped for top US economic policy positions such as Treasury secretary. He was praised by former President Donald Trump and spoke to Vice President Kamala Harris earlier this month. Despite speaking out about the qualities the next president should have, Dimon has not publicly endorsed either candidate.

JPMorgan plans to split the CEO and chairman posts, 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 Morgan Stanley’s move to retain former chief James Gorman during Ted Pick’s first year as CEO.

Some analysts expect Dimon to remain at the helm until 2026, when he will earn a retention award of 1.5 million options in the form of stock appreciation rights.

After a two-decade stint as “probably the most admired 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 BANK”

Dimon cited a group of “highly qualified” executives who are poised to lead the lender once he leaves.

Directors 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 candidates 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 also said.

“The market has often touted Lake and Piepszak as trailblazers, and both are highly regarded by the investment community,” said HSBC analyst Saul Martinez. Both women served as chief financial officer at the bank.

Indeed, JPMorgan could be the next major US bank to have a female CEO after Citigroup became the first to do so in 2021 when it named Jane Fraser as CEO.

JPMorgan has sought to create diversity in its ranks for decades, though it says gender was not a specific factor in its CEO selection.

“The bank has a deep bench and the potential CEOs are all very competent” because they’ve run businesses, said Macrae Sykes, a portfolio manager at Gabelli Funds, which owns JPMorgan shares. “But the council may 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, as he was seen as instrumental to its success.

“Investors knew Jobs wasn’t feeling well and the stock reacted … but since then, and under new management, it’s been on an upward trajectory as the turmoil settled,” he added.

Analysts have also compared Dimon’s leadership to that of Warren Buffett, the 94-year-old billionaire head of Berkshire Hathaway, because both leaders are so closely identified with the success of their companies.

Indeed, JPMorgan’s fortunes have soared under his leadership — its profit rose to a record in the second quarter after posting its biggest annual profit last year.

Shares have climbed nearly 24 percent so far in 2024, outperforming an index of broader U.S. bank shares that has risen nearly 19 percent.

The lender has raised its outlook for net interest income — or the difference between earnings it earns on loans and what it pays out on deposits — this year and has also boosted its dividend. It will report third-quarter earnings on October 11.

(Reporting by Nupur Anand in New York, additional reporting by Suzanne McGee, Svea Herbst-Bayliss and Ross Kerber, editing by Lananh Nguyen and Deepa Babington)