Jamie Dimon, Chairman and CEO of JPMorgan Chase, has always been bullish on India. During the J P Morgan India Investor Summit in late 2023, he highlighted the significant growth of J P Morgan, the Indian subsidiary of the world’s largest bank by market cap ($538 billion as of March 4, 2024), over the past few years.
Although J P Morgan primarily focusses on wholesale banking in the country, its target areas extend beyond just large Indian corporates or multinational companies. New-age companies and even other players in the banking industry who could be competitors in some segments are huge business opportunities for the bank that has emerged as the winner in the Best Foreign Bank category in the BT-KPMG Best Banks and NBFCs Survey 2022-23 for the third year in a row.
“Our [primary] business in India is wholesale, and we will continue to pursue value-added solutions and innovations on the wholesale side of the business... but, some of the solutions that we are developing on the wholesale side of the business are relevant for [other] banks as well,” says Kaustubh Kulkarni, Senior Country Officer-India and Vice Chairman-Asia Pacific, J P Morgan.
J P Morgan is also innovating a lot on the blockchain, and according to Kulkarni, some Indian banks are currently “evaluating” potential partnerships with the foreign bank to leverage solutions developed by it. “We can be a technology partner for an Indian bank where they will use solutions that we create for them but for their customers and clients,” he says.
This is significant because J P Morgan’s strategy goes beyond just being the preferred financial services partner for Indian entities. It also involves collaborating with them as an innovation or technology partner. Currently, the financial services element dominates the two business models, accounting for 98% of the bank’s total business. “It is important for us to do the 2%, as it will keep us ahead of everybody else,” says Kulkarni.
Interestingly, the bank has scored high on various parameters, including growth in operating profit, absolute increase in CASA market share, three-year CAGR of total deposits, cost-income ratio, return on assets, and return on capital employed, among other things. However, this does not in any way imply that the bank is not focussing on innovation. “As a bank counterparty, we can do a number of things. We also want to see what more we can do with the technology capabilities and the solutions that we have developed and used for ourselves,” says Kulkarni.
With a strong focus on the new-age economy, J P Morgan is now placing greater importance on capitalising on emerging opportunities following the banking crisis in the US. “We continue to focus on [emerging companies] and we are only going to increase the focus more because of the challenges we are seeing across the globe. We are now working with a lot more companies. Many US companies that were earlier banked by other banks are now our clients. Some of those [companies] have an active ecosystem in the Indian context as well,” explains Kulkarni.
The year 2023 saw the failure of three large banks—Silicon Valley Bank, Signature Bank, and First Republic Bank—in the US, which opened up business opportunities for other major banks, including J P Morgan.
According to Kulkarni, the multinational bank has attained critical size and scale in the new-economy segment in the US, and the benefits would be visible in other key markets, including India. “We have critical scale in the new-economy segment in the US, and the net result is that we have a very competitive product and solution offering for new-economy companies globally,” he says, adding that there are four to five important markets including the UK, Israel, the Middle East, and India.
And new-age companies offer not just banking business potential for J P Morgan, but also vast opportunities in investment banking and the capital market. The Indian arm of the global bank is already among the leaders in the foreign banking space when it comes to market share in segments like foreign portfolio investor (FPI) transactions in the capital market and also in acting as a custodian for such overseas investors. It holds a significant market share of 23-25% in the custodian business. “As India grows and new-age companies scale up further, the need for capital and partnerships will only increase and we will play an important role in all aspects—debt, corporate banking, and investment banking—to engage with companies,” says Kulkarni.
Going forward, the bank wants to focus more on financial inclusion and energy transition, among other things, while continuously advancing in both traditional- and investment banking. Kulkarni is optimistic about the current growth opportunities in the banking space in India. According to him, there will be a lot happening in terms of diversification, while growth could be calibrated. “This is probably one of the best periods of growth for the banks. We are probably early- to mid-way in the cycle. Growth will be healthy on the asset side, and on the liability and deposit sides, it would be quite reasonable. By and large, NPA formation will not be there, but you will see some NPA formation somewhere on the edges. It does not mean that some NPA challenge is coming immediately,” he says.
There will be a lot of investment opportunities from the private sector resulting in financing opportunities for the bank from good quality companies, adds Kulkarni.
This certainly means good news for J P Morgan in particular and the Indian banking fraternity in general.
@ashishrukhaiyar