JP Morgan Chase is planning its first large assault on Europe's retail financial services market by selling fixed-income and structured products to private investors.
The US bank, which this year announced plans to buy rival Bank One for $58bn, is putting together a series of distribution agreements with retail and private banks across the continent that do nothave the ability to make their own fixed-income and structured products. Bill Winters, who on Friday was named co-chief executive of the JP Morgan investment bank alongside Steve Black, said: "If we do it right we can make hundreds of millions of dollars."
However, as distributing financial products is usually more profitable than creating them, the move could prompt speculation that JPM plans eventually to acquire its own retail network in Europe by buying a bank. The bank denied it had such plans. Instead, it saw its strategy of establishing distribution agreements with local banks as an alternative to buying its own network. "We won't disintermediate our clients. We are not trying to go around them," Mr Winters said. "We have not considered extending our retail presence outside the US. You could never justify the premium simply to have an outlet for investment banking products." Walter Gubert, chairman of the group in Europe, said: "If you are a bank in Europe, do you want to tie up with us if you think we are about to become a competitor? We are not about to become a competitor."
JPM will target both retail clients and high net worth individuals. A team at the bank has been working on the plans since the end of last year and pilot schemes in Germany and Switzerland are planned for the first half of this year. The Netherlands and UK could follow. The bank already sells equity-related products through third parties but plans a more determined assault on the retail market with a wider product range and distribution. Simple products will include corporate bonds. More complex products could include notes linked to the performance of hedge fund indices. Typically, the products will carry a JP Morgan label. Mr Winters said that, in spite of the use of other banks' distribution networks, the move required about $50m of investment in infrastructure by JP Morgan over the next three years.
