2014

KIIT School of
Management
Abhijeet Singh
MBA, IT & Finance

JPMorgan Chase & Co.

A study & analysis of JPMs key success factors and its empowering IT strategies.

November 24, 2014

Table of Contents
About JPM ....................................................................................................................................... 2
Key Strengths .................................................................................................................................. 2
SWOT Analysis................................................................................................................................. 3
Overview ..................................................................................................................................... 3
Strengths ................................................................................................................................. 3
Weaknesses............................................................................................................................. 4
Opportunities .......................................................................................................................... 4
Threats .................................................................................................................................... 4
IT applications and their success .................................................................................................... 5
IT strategies and utilization ............................................................................................................. 7

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November 24, 2014

About JPM
JPMorgan Chase & Co. is a U.S. based banking and financial services company formed in year
2000 as a result of merger between JPMorgan & Co. and Chase Manhattan Corporation. JPM
having its origins dated back to 1895 is one of the oldest players in financial services and
currently is the largest bank (assets worth: $2.515T) in the United States. Being such a large
player in the BFSI1 domain, JPMorgan Chase becomes a huge consumer of IT and related
services as 32% of its total annual expenditure (8% of total revenue) gets invested in IT. It is
headquartered in New York, US.
It is a major provider of financial services and according to Forbes magazine is the world's third
largest public company based on a composite ranking. Its major services include investment
banking (2nd largest hedge fund in US), asset management, private banking, private wealth
management and treasury & securities services divisions; all of which require heavy
consumption of IT systems and resources to be up and running throughout. Requirement of
new applications, porting of legacy systems, maintenance etc. is carried by a large skilled
(30,000+ technologists) in-home IT workforce.

Key Strengths

Strong Domestic player JPM is the largest bank in US in terms of net asset worth
($2.515T), market value and revenue ($96.60B). It is a leader in hedge funding and is the
2nd largest player in US according to Forbes.
Global reach JPM has a strong international reach which gives it a strong advantage
over other financial services providers. The clients who are MNCs and need global
catering reach to JPM for requisite services.
Mature in the industry JPMorgan Chase & Co. (2000) was formed due a successful
merger of two old financial players of the US market: JPMorgan & Co. (1895) and Chase
Manhattan Bank (1955) which was in turn a result of purchase of Chase National Bank
(1877) by Bank of the Manhattan Company (1799). Such mergers led to addition of
values and ideas and thus, JPM stands as a stable player in current era. It proved its
stability and maturity in the 2007s adverse US recession.
Strong Brand value JPM is backed by globally renowned and trusted financial services
providers: JPMorgan & Co. and Chase Manhattan Bank which adds customer loyalty and
faith towards the company.

Banking, Financial Services and Institutions

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November 24, 2014

SWOT Analysis
Strengths

High Capital
Market Presence
Good Brand visibility in B2B segment

Weaknesses

Overdependance on US market
Instability due to variability in financial market
Bad Mortgages

Opportunities

Positive outlook in Global Market

Cross-selling of financial products
Commercial banking

Threats

Govt. regulations
Financial crisis and weakening of $ power
Global competition

Overview
JPMs strong capital adequacy and strong market position are the key strengths. The company
has intense competition from other major players like Citigroup Inc., Deutsche Bank AG etc.
which may impact its future performance. However, JPMs initiative to spread in B2C banking
could bring new opportunities.
Strengths
JPM flaunts a huge capital base which ensures stability and empowers it with the choice of
investment in required domains. It utilizes Capital Risk Management to mitigate risk and
strengthen its market position. Total deposits rose to $1.3T in 2013, indicating an increase of
8% from 2012. Total stockholders equity in 2013 was $211.2B 2. Being an old player, JPM bags a
strong market presence which clearly shines thru its net worth of total assets valuated to
$2.515T3. It offers financial services to nearly 50% of US households, 80% of Fortune 500
companies, and 60% of the worlds largest pensions and central banks. The B2C banking
division of JPM has 5,640 branches and 19,220 ATMs (and counting). One of the largest credit
card issuers with over $128B in credit card loans and has good geographical division to cater its
globally distributed client base.
2
3

JPM WikiWealth: http://www.wikiwealth.com/research:jpm

JPM financial statements: investing.money.msn.com/investments/stock-income-statement/?symbol=us:jpm

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November 24, 2014

JPMorgan Chase has a strong brand backing and has won customer loyalty by providing them
above par financial services since, 19 th century. It was ranked first in deposit growth and 1st in
customer satisfaction amongst the largest banks in a market research conducted by The
American Customer Satisfaction Index. The consumer banking division of JPM, the Corporate &
Investment Bank ranked first in Global Investment Banking Fees.
Weaknesses
JPMs 70% of total revenue is generated from US market and this overdependence caused
decline in financial performance in FY2007. Net income declined to $15,920M in FY2007
compared to $18,285M in FY20064. It also suffers losses on outstanding mortgages and related
obligations as the credits are not fully recovered.
Opportunities
JPM has a positive future outlook in terms of emerging global market economies and is
reported to have huge inflow of funds. Assuming stable economic growth, total household
wealth (US) is expected to rise by approximately from $223T in 2012 to $330T in 2017 5. The
corporate houses need more Asset Management services because of expanding market which
creates positive outlook for JPM.
The company has taken several strategic decisions which enable it to enjoy fruitful
opportunities in coming future. On August 2014, JPM entered into an agreement with
Lexington Partners and Alp Invest to divest its stake in about 50% of portfolio companies held
by One Equity Partners, which makes it more stable in unpredictable financial crisis and
recessions. In June, 2014 JPM acquired 8.6% of shareholding interest in Legend Mining Ltd
which is expected to add to the net revenue of FY2014.
Threats
Govt. and Bank governing organizations stringent policies pose as a threat to most of the
Financial Institutions. JPM is under the Basel III Norms on Capital Requirements which
mandates it to hold more capital, carry more liquid assets, and reduce leverage. This ensures
that banks hold more capital, which will limit the amount of money they can lend (less interest
earned), but also reduce the risk of insolvency given many loan defaults. Hence, Basel III
reduces insolvency risk but in turn does not let the FI to fully utilize its capital.
Being a diverse player in the BFSI sector, JPM attracts high level competition from across the
geography and multiple companies. Few of the giants in the competitors list are The Goldman
Sachs Group, Barclays PLC and others.

4
5

JPMorgan Chase & Co. Financial Statements - MSN Money

Speculation as per the research by GlobalData Solutions Inc.

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November 24, 2014

IT applications and their success

JPMs financial services are entirely driven by IT at the backend. For a competitive advantage
and to provide differentiated services, the technology of JPM has developed business tailored
applications to provide the special needs of JPMorgans running business. The customized
applications have been fine tuned to provide requisite solution and utilize optimum resources &
deliver high-end performance as per JPMs IT infrastructure.
JPM believes that technological advancement is crucial for its success and it invites global
technologists with the line, Technology ignites our business. Be the spark.6 In order to be a
part of JPM and drive its business with cutting-edge technology. Some of the applications which
have been developed and being executed by JPMs tech team to support its business are:

Athena (Investment Banking Technology): Athena is a risk management, analysis and

trade management tool which provides a common platform to achieve effective risk
analysis and risk mitigation. As it has been built by JPMs technology team, the in-house
analysts have provisioned solution for commonly occurring risks in trades. Supports
custom development of trading models as per the need of JPMs subsidiaries or its
clients. It comes with a framework namely Reactive Athena which helps to develop
custom applications for algorithmic trading, simulations etc. Athena has helped JPM by
simplifying operations and eliminating redundant processes, which leads to increased
understandability and lower costs.
CBB (Compute BackBone): It is a scalable internal cloud computing service specifically
designed by J.P. Morgan technologists to allow developers to rapidly test and scale
computationally resource demanding applications by utilizing distributed cloud
computing technology. JPM utilizes CBB to test its data centralizing, trade monitoring
and e-Commerce applications before actual deployment.
ERTRS (Equities Real Time Risk Systems): It provides the ability to price and risk manage
accurately in real-time, incorporating the latest market data. Using high-performance
computing infrastructure and software, these systems give even the most complex of
businesses the information they need to react quickly, providing a better, faster, and
more accurate service to customers that allows them to make the most of a fastchanging marketplace. JPM uses ERTRS to allow in-house traders to seamlessly price
new customer deals and book the transactions in real time. The ability to track fast
markets allows hedging the funds more effectively and reacting quickly to market
changes.

JPM Tech careers trademark line

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November 24, 2014

Empire (Fixed Income Web Analytics): It is a suite of web applications that JPM uses to
visualize and analyze financial data within Fixed Income capital markets. It provides
charting, analysis and monitoring 24x7 of capital markets. Together with DataQuery
(application for analyzing & charting of historic financial data), the system supports the
review and display of data across multiple platforms and software packages, including
web viewing, desktop clients, Excel export and provision of data through an API for
other systems and applications. Empire being a real-time web-based platform helps the
JPM analysts and traders to monitor market activity and perform analytic
calculations/run trade analysis. Powered with time-series database technology with
distributed architecture (Vertica 7), Empire becomes one of the crucial applications for
real-time market monitoring for JPM and its subsidiaries.
Emerging Markets Open Blotter: It is a web-based application that allows Emerging
Market (EM) traders to trade various EM products. Open Blotter was developed to solve
the existing limitations of multiple local solutions, which leads to increased complexity
and declines productivity. Since, J.P. Morgan trades in 17 different EM countries,
software deployment was a very cumbersome task because of requirement of physical
presence at the centers for bug free deployment. It allows sending many trade types
into multiple trading systems from a central one-point location. Thus, decreasing
complexity and removing hassle of trading from multiple systems.
Investment Banking Intelligence Engine: It is a data management platform that JPM
uses to collect, conform, calculate, distribute and report on client-related data and a
huge collection of finance based metrics for the Wholesale Bank8. The platform provides
business users and company leadership with mission-critical business metrics, delivers
measurable business benefits. It plays an important part in the strategy of the
Wholesale Bank and the Global Investment Bank. IBIE is the Master record for important
client profitability measures (e.g. RoE, RoI) used by the balance sheet committee and in
client prioritization process. Populating large data marts was a challenge because of
distributed DB and huge amount of data presence, but IBIE utilizes Vertica DMBS which
enables to derive 300-500 financial attributes in a viewable window. Thus, reducing
operational time and adds more visibility of data for the analysts. This allowed JPM to
be more agile and take strategic decisions in a timely manner, to robustly adjust to
changing market conditions and competitive pressures, and to improve overall
experience for its clients.

DBMS architecture supporting column-store technology

Investment Bank, Commercial Bank, Treasury & Securities Services, Asset Wealth Management, Private Bank and
Global Corporate Bank
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November 24, 2014

IT strategies and utilization

JPMs successes in the B2B field are quite impressive and can be directly supported by the fact
that in FY2013 the company had a net margin of 33.8% and reported interest income of
$12,860M for the Q2 of FY2014. JPM being an IT driven giant, invested $8B in IT (FY2013).

QuickPay and QuickDeposit: Providing computerized deposits (QuickDeposit9) and

payments (QuickPay10), integrating online and mobile transactions, integrating global
clients international transactions, maintaining integrity and security of financial data
etc. is a huge task being carried out by JPMs technology team.
The IT contract with IBM: JPM had a $5B contract with IBM under which it was
outsourcing all its IT management and maintenance to IBM. But soon after the
acquisition of Bank One, JPM realized that it would be ideal to utilize Bank Ones existing
3000 IT workforce for expanding and creating an in-house IT department. This led to
premature expiration of the contract as JPM realized IT as an integral part of its core
business & cancelled the outsourcing.
Awards and recognitions for IT advancement: The Technology Business Development
team at JPM ensures that IT and the business are cohesively connected to the latest and
flexible technology ecosystem. This includes various awards for the technological
advancement JPM brings in for its clients and a smooth business flow: Chase #1 among
global banks in Forrester Researchs 2013 Global and U.S. for Mobile Banking
Functionality Rankings, it received Best in Class: Mobile Banking title for 2011 from
Javelin Strategy & Research and it also bagged #14 in Institutional Investors 2013 for
using data visualization technology which in the words of Ben Sylvester (Asset Manager,
JPM) gives traders a research and development environment in which they can input
live orders and think about how to model their next move.

Recently, JPMorgan Chase has been pushing norms in the field of automation by utilizing IT and
it evicted 3000 employees in order to gain cost advantage. It plans to push this number to 7000
at the end of year 2014. Being such a huge consumer of IT services & maintenance and
expanding its IT base to increase automation and shred costs, JPMorgan Chase ideally is an FI
giant heavily empowered through IT.

Computer assisted deposition facility by Chase Banking, facilitated over $1.5B worth of deposits
Payment (e-Commerce) facility by Chase Banking, used for over $1.4B in transactions since its inception
Reference(s): http://en.wikipedia.org/wiki/JPMorgan_Chase
http://www.jpmorgan.co m/tech careers/us/technology
http://finance.yahoo.com/q/co?s=JPM+Co mpetitors
10

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