NEW YORK (
new head of investment banking,
, laid out the biggest challenges facing his unit this year for analysts and investors on Thursday, citing compression in fixed income margins, reduced capital markets activities and an uncertain regulatory backdrop in the United States.
But he also showed confidence in setting some aggressive growth targets for his group.
As the first of six business heads presenting during JPMorgan Chase's investor day on Thursday, Staley seemed comfortable and confident in his new role speaking for the first time as CEO of the investment bank to a group of more than 400 attendees and many more listening remotely. It doesn't hurt that he now heads a unit that brought in just under two-thirds of JPMorgan Chase's overall profit last year.
According to presentation materials released by the company citing Dealogic, JPMorgan ranks No. 1 in global investment banking fees, global loan syndication volumes, global debt, equity and equity-related volume.
Yet challenges do exist in the business, including the compression in fixed income margins, which has played out over the past few quarters, as well as a reduction in capital markets activities, particularly from the financial sector, he said.
"We need to adjust our business model for those changes and
regulations as they come," Staley said.
JPMorgan has lowered its estimates for return on equity for the investment bank for 2010 to 17% from 20% ROE.
"The recapitalization of the financial system, while it's not done ... more than likely the recapitalization is not going to be to the extent it was last year," Staley said.
One attendee asked if the current heightened political environment was the reason why JPMorgan decided to only acquire a portion of the RBS Sempra business.
"We were taking into consideration the environment we were in. Obviously ... there was discussion around proprietary trading. That did influence us. The assets that we really wanted were the ones that we got. Those assets have virtually no proprietary trading," Staley said.
Despite the uncertain backdrop regarding the economy and political pressures facing large universal banks Staley is setting some lofty goals for his unit in 2010. JPMorgan is targeting 10% of the wallet share of global investment banking fees (up from 9.2% last year) and 15% of the wallet share of markets revenue (up from 12.4%) last year.
Growth initiatives for the unit include expanding market share in areas such as Southeast Asia, Australia and Japan. It also plans to further expand in two areas where JPMorgan has traditionally not had large exposure -- equities and commodities.
"We're going to stay focused on our growth initiatives," Staley said. "We're not going to pull back. We will stay focused on the most important value proposition of the investment bank, which are our clients."
JPMorgan shares were down about 1.6% to $40.20 in afternoon action. The stock is down slightly year-to-date, and was languishing roughly 15% below its 52-week high of $47.47 at current levels.
--Written by Laurie Kulikowski in New York.