JPMorgan Chase has made more than 30 acquisitions in 2021, putting America’s biggest bank by assets on track for its largest buying spree in years.
The acquisitions and investments in other companies, mostly of smaller groups ranging from an online money manager in Britain to a Brazilian digital bank, are a sign of how JPMorgan chief Jamie Dimon is turning to deals to expand the banking giant.
Parts of the bank’s core business have been bogged down by low interest rates and are confronting greater competition from financial technology companies and unregulated lenders.
Dimon flagged last year that JPMorgan would be “more aggressive in acquisitions across the board”.
The bank has done 33 deals in 2021, one shy of its total for the whole of 2020, according to data from Refinitiv. The prices of most of the deals were not publicly disclosed.
Nine of them took place in June, including two last week: the purchase of OpenInvest, a platform that allows customers to customise a portfolio based on environmental, social and governance metrics, and a minority stake in the Brazilian digital bank C6.
This followed its acquisitions of Nutmeg, a UK digital wealth management platform, for about $700m and Campbell Global, a forest management and timberland investment company.
In March, JPMorgan also took a 10 per cent stake in China Merchants Bank’s wealth management business for about $410m.
“It’s a string of pearls approach where they buy smaller fintech firms to better advance the asset management business with lower cultural, operating and goodwill hurdles than come with a large acquisition,” said Mike Mayo, an analyst at Wells Fargo.
JPMorgan can then leverage those smaller businesses with its large network, Mayo added. “The keyword here is scalability and how well they can link and leverage these deals to their existing business and across retail customers.”
The bank is also turning to deals to respond to growing investor demand for ESG exposure and clients seeking digital banking and asset management services, analysts said.
“The focus appears to be on companies that can support JPMorgan’s digital strategies or companies that can give the company an advantage in the rapidly growing area of ESG investing,” said James Shanahan, analyst at Edward Jones.
For Dimon, who has led JPMorgan since 2005, the dealmaking marked a return to his roots on Wall Street, where he served as chief lieutenant to Sandy Weill during a series of acquisitions that led to the creation of Citigroup.
The emphasis on making smaller acquisitions also highlighted the hurdles to JPMorgan doing a larger deal for a rival bank, which would run up against regulatory caps on deposits.
One area where JPMorgan has indicated a willingness to do larger deals is in asset management. The bank lost out to Morgan Stanley last year in the $7bn bidding war for US investment manager Eaton Vance.
JPMorgan’s purchase of OpenInvest was also the latest attempt by established players to expand into personalised investment services. Morgan Stanley gained control of Parametric, a direct indexing platform, when it bought Eaton Vance last year, while BlackRock bought Aperio, another direct indexing venture, in November.
JPMorgan’s asset management business was “doing well and they have had decent net flows for an active manager [but] they lack a passive presence and are behind BlackRock, Vanguard and State Street”, Mayo said.
Ultimately, the deals represent an attempt to find revenue streams beyond traditional banking services — an imperative Dimon addressed at a conference in June.
“I think the banking system is going to be really in tough shape. That’s my own personal view. And there will be winners in there, but it won’t be all of them,” Dimon said.
Asked if JPMorgan would emerge victorious, Dimon responded: “We’ll do whatever it takes. And so help us, God.”