Mike Mayo, the analyst who sparred at JPMorgan Chase & Co.’s 2013 investor day with Chief Executive Officer Jamie Dimon, challenged the bank at today’s event about the logic of holding an asset-management business.
Mayo, an analyst at CLSA Ltd., asked Mary Erdoes, CEO of JPMorgan’s asset manager, how it feels to be “trapped” in a bank that he estimates is valued at about 40 percent less than companies in her business, based on price-to-earnings ratios.
“You would probably be worth a lot more as a standalone,” Mayo said. “How does it feel to be a 17 P-E business trapped in a 10 P-E company?”
Dimon has said clients benefit from the array of services provided by his New York-based company. JPMorgan is the largest U.S. bank, and today’s session featured presentations by commercial, retail and investment bankers, along with Erdoes, who oversees more than $2 trillion. She said her unit helps JPMorgan meet “holistic needs” of customers, and that the valuation hasn’t hurt compensation of top money managers.
“We work very hard to deliver the whole company to the clients,” Erdoes said today. “Someday we believe that all the value of this part of the business will be reflected in the stock price.”
JPMorgan has advanced 20 percent in the past 12 months, beating the 14 percent gain of T. Rowe Price Group Inc., while trailing BlackRock Inc.’s 27 percent rally. JPMorgan trades for about 8.6 times reported earnings, less than half the ratio at BlackRock, the world’s largest money manager, according to data compiled by Bloomberg.
“The stock has done fine as a competitive matter, against most major competitors,” Dimon told Mayo today. “More than fine, which you’ve noted yourself in some of your analyst reports.”
In July 2012, Mayo said Morgan Stanley would be worth as much as $32 if the firm were broken up. The bank, which didn’t heed his call, has since more than doubled to $29.71 at 4 p.m. in New York. The gain was fueled by improved profitability at its brokerage unit.
Mayo asked Dimon at last year’s gathering if clients might shift to banks with the highest capital ratios, citing UBS AG as one company that could seek to win business from JPMorgan.
Dimon countered, “so you would go to UBS” rather than JPMorgan? “I didn’t say that,” Mayo responded. “I said that was their argument.”
“That’s why I’m richer than you,” Dimon said, drawing laughter from the audience.