Blythe Masters, who rose from being a JPMorgan Chase & Co. intern to global head of a commodities powerhouse over 27 years, plans to exit after she helps the bank complete the $3.5 billion sale of units she oversees.
Masters, 45, “has informed us of her intention to leave the firm, take some well-deserved time off and consider future opportunities,” Chief Executive Officer Jamie Dimon, 58, and investment-banking head Daniel Pinto, 51, said today in a memo.
JPMorgan announced the sale of its physical commodities business to Mercuria Energy Group Ltd. last month amid pressure from regulators and lawmakers concerned that banks handling raw materials and energy could manipulate prices or endanger the financial system. That raised the question of whether Masters would join Mercuria, a decade old Geneva-based trader, or remain at JPMorgan to manage a diminished business. She chose neither.
“There was little reason for her to stay at JPMorgan given that her baby is being sold from underneath her,” said Charles Peabody, an analyst at Portales Partners LLC in New York. “I’m not shocked she didn’t end up at Mercuria because they have a senior group that is probably tightknit, and she would’ve been a substantial person to try and integrate.”
JPMorgan said in March that the sale probably will be completed by the third quarter. The firm will continue providing commodities-related services including financing, market-making and the vaulting and trading of precious metals. The New York-based bank will announce a new head for the remaining units soon, according to the memo.
Discussions about Masters’s potential role at the acquirer were held off until after the final agreement’s announcement, and Mercuria executives were impressed with her negotiating ability, said a person with direct knowledge of the deliberations, asking not to be identified because talks were private.
Masters rose to prominence in the 1990s after helping develop credit-default swaps, the derivatives that enable investors to hedge risks on bonds. She ran several credit desks and became the investment bank’s chief financial officer before being named to run the commodities business in late 2006.
JPMorgan’s commodities trading surged with the 2008 acquisition of Bear Stearns Cos., which included an energy-trading platform. To compete with New York-based Goldman Sachs Group Inc. and Morgan Stanley, JPMorgan bought UBS AG’s global agriculture and Canadian commodities units in 2009, and part of commodities trader RBS Sempra in 2010.
Before the acquisitions, JPMorgan missed out on opportunities that enriched rivals, including the 2008 spike in oil prices, because it lacked the infrastructure to store and ship oil and other commodities, Masters told employees during an August 2010 conference call.
Competitors were now scared of JPMorgan, she said at the time. “They’d better be, because this is a platform that’s going to win,” Masters said.
She returned to the spotlight in July of last year, when JPMorgan agreed to pay $410 million to settle U.S. Federal Energy Regulatory Commission allegations that units she oversaw manipulated power markets, enriching itself at the expense of California and Midwest residents from 2010 to 2012.
The settlement released JPMorgan, all subsidiaries and employees, including Masters, from any future enforcement actions by FERC in the case. The bidding strategies at issue were developed by a Houston-based unit run by Francis Dunleavy, who was one of eight people who reported directly to Masters.
Spurred by complaints from industrial customers, U.S. lawmakers held hearings in July on whether banks abused their ownership of raw materials to inflate prices. The lawmakers warned that a catastrophe involving a bank-owned supertanker or power plant could jeopardize a lender’s health and leave taxpayers on the hook for a bailout.
That same month, the Federal Reserve said it was reviewing a decade-old decision that allowed lenders including JPMorgan and Citigroup Inc. into the business because physical commodities were “complementary” to banking.
JPMorgan announced in July that it was exploring a sale of its physical commodities business, including energy trading. Mercuria, founded in 2004 by former Goldman Sachs traders Marco Dunand and Daniel Jaeggi, is the fourth-largest independent commodity trader.
The JPMorgan unit gives Mercuria physical crude, petroleum products, power and natural gas trading portfolios in the U.S. as well as oil infrastructure assets in North America. The business also owns metals warehouses, including Henry Bath & Son Ltd. operations that would complement Mercuria’s metals-trading business.