Feeling the heat: JPMorgan boss Jamie Dimon.
Brand health check: Banking on a recovery
Earlier this year, JPMorgan sparked fears reminiscent of the 2009 Lehman Brothers fiasco, with its US$2 billion trading loss, with the public once again questioning regulators’ ability to monitor the finance industry.
For JPMorgan, this has been an especially trying period as Congress began investigations into the losses. Chief executive officer Jamie Dimon has been actively fronting the bank’s crisis, admitting to the Senate the losses, which pulled nearly US$23 billion from the bank’s market value, could be attributed to a weak investing strategy along with “management failures”, according to a Bloomberg report.
While Dimon has been quick to offer his mea culpas and openly criticise his own leadership and the bank’s processes to the Senate Banking Committee, investigations are still ongoing.
“We have to get rid of anything that looks like too-big-to-fail,” Dimon said.
“We have to allow our big institutions to fail. It’s part of the health of the system. We shouldn’t prop them up. We have to allow them to fail,” admitting in another interview the bank had been “stupid”.
While it seems measures are being carried out to remedy the disaster, just how much has its reputation suffered? According to the San Francisco Chronicle, JPMorgan shareholders have already seen almost US$39 billion of market value wiped out since the loss was first reported in April this year. Has the debacle really dented JPMorgan’s reputation? If so, where is the road to recovery?
Financial highlights for Q1 2012
(in millions, except per share, ratio and head count data)
Total net revenue
Total non-interest expense
Provision for credit losses
JPMorgan Chase & Co.
The JPMorgan situation reaffirms yet again that reputation is your most valuable asset.
Let’s consider a different starting point, which is to put the actual trading loss into perspective: JPMorgan made roughly $39 billion in pure profit last year and nearly $10 billion in the first quarter of 2012.
You do not achieve that kind of spectacular profit without a degree of risk. In some respects, one could argue the trading loss – the cause of all this “fuss” – is small compared with the bank’s recent profit performance. To mix metaphors, you could argue that corner, but you’d be barking up the wrong tree. The actual portfolio loss pales in significance when considering the tangible impact on the company’s reputation and financial position. The initial US$2 billion loss quickly sliced US$14 billion off JPMorgan’s market cap. Many billions have been burned and people have lost their jobs, some rightly so. The loss will cost much more, in terms of JPM’s valuation, customer confidence and the wider public perception, as well as the very real likelihood of tougher legislative or regulatory restrictions.
Which only goes to prove that the record is still in the groove: “Reputation is your most valuable asset.”
• Full disclosure, acknowledgement of the problems, acceptance of fault and commitments going forward.
• High marks for Jamie Dimon’s visibility and accountability.
• Restore trust over time, tangible action and a transparent rapport.
Bill Rylance, Founder and CEO, Watatawa
JPMorgan’s predicament is not unique. In recent times, financial institutions have had to operate in this increasingly hostile reputation environment where every issue, every reported loss, and every inquiry is connected in the minds of the public to a broader general narrative that assumes conspiracy at worst and big business collusion at best. The key for brands such as JPMorgan is to understand the drivers of corporate reputation and the relevance of its internal corporate culture and external business conduct. When a loss of this magnitude becomes known to the public, an organisation’s leadership needs to take matters into its own hands and address the situation with an authentic and factual response in a structured and consistent way. Many commentators pointed out there was nothing wrong with a business that typically reports large profits posting a loss from time to time: that is the nature of markets. The absence of context and perhaps detail made this about more than the loss itself. It became again about the culture and practice of the financial sector. The pathway to re-establishing trust is ongoing, and post-issue it should over-emphasise the essential building blocks.
• Understand the drivers of corporate reputation.
• Separate from the crowd and emphasise leadership, corporate culture and communication.
• Address the situation with an authentic and factual response.
Stephen Robertson, Director, Southeast Asia Edelman
- JP Morgan
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