JP Morgan chief executive Jamie Dimon sees the US banking giant's planned purchase of Cork-based fintech Global Shares fuelling its lucrative business working on initial public offerings (IPOs) in the future, even as flotations globally have slumped so far this year amid geopolitical and stock market turmoil.
The Wall Street banking group said in March it had agreed to buy Global Shares, which administers employee share plans for more than 600 corporate clients ranging from start-ups to large publicly quoted groups, in a deal said to be worth $730 million (€691 million). While the purchase is not set to close until the second half of this year, Mr Dimon travelled to the Clonakilty-based company on Monday to meet management and staff.
“Since we bank so many corporations around the world, it’s a natural product to offer. It helps with asset and wealth management, it helps private banking, as it could be a client generator. The private markets are becoming so big. I think down the road there will be tonnes of other adjacencies that we will probably want to do,” Mr Dimon told The Irish Times, adding that he saw the Global Shares product also developing relationships with companies ultimately eyeing IPOs.
Global Shares, founded in 2005, has built up a base of almost $200 billion of assets under administration on behalf of 650,000 corporate employee participants since the launch in 2016 of its key software. Led by chief executive Tim Houstoun, who joined the company in 2008, Global Shares itself had been planning a possible flotation in 2024 before it began talks with JP Morgan began last December.
The US banking giant’s name is already opening doors to new clients, Mr Houstoun said, predicting that its growth in assets under administration would accelerate from the average 40 per cent compound annual rate seen since 2016.
Global Shares' main competitors are Morgan Stanley and the Australian firm Computershare, while clients include Saudi Aramco, L'Oréal, Krispy Kreme, Bosch, Bose and Cargill, the world's largest privately owned company.
IPO and share placement fees generated globally by the world's top investment banks, including JP Morgan, fell almost 75 per cent on the year in the first three months 2022, according to Financial Times data, following record-breaking levels of activity last year. The slump has been driven by market nervousness surrounding the expected pace of interest rate hikes by major central banks to combat inflation and the threat of the war in Ukraine triggering a recession across western economies.
The US Federal Reserve raised rates last month for the first time since 2018 and is widely expected to announce a further half percentage-point increase on Wednesday. Some economists say the Fed risks making a policy mistake by moving too aggressively at a time when Ukraine war is weighing on the global economy.
However, Mr Dimon said that the policy error had already occurred as a result of the level of money that was pumped into the global economy by governments during the Covid-19 crisis.
“We have to remember that two years ago global unemployment was as high as it’s ever been and we had no vaccine. I give credit to governments and central banks for taking extraordinary action – fiscal and monetary,” Mr Dimon said. However, he said that “half of the money” was spent by governments during the pandemic “is just sitting in people’s pockets”.
“Can [the Fed] pull off a soft landing? At this point, to estimate the odds, I’d give it a 30 per cent chance. There’s a 30 per cent chance it won’t be a soft landing. But it’s important to keep in mind that sometimes a Fed-induced recession is short and sweet,” he said.
Mr Dimon added: “And then you’ve got Ukraine. First and foremost, our hearts go out to the Ukrainian people because of the humanitarian crisis. But it’s a war and we don’t know how it’s going to end. It could get worse. The sanctions could get worse. It’s causing complete turmoil in commodity markets around the world and that could get much worse. That’s what we have to be prepared for.”