JPMorgan Loses Another Potential Dimon Heir as Zames Walks

Jun 9, 2017 | Bloomberg

JPMorgan Chase & Co. Chief Operating Officer Matt Zames, the intense ex-hedge fund trader who helped clean up the bank’s London Whale debacle and was seen as a possible successor to Chief Executive Officer Jamie Dimon, is leaving with the aim of running another company.

“I’ve been in this business for almost a quarter century, and I’ve spent the vast majority of my career building businesses front to back,” Zames, 46, said in a telephone interview. “I want to get back to that, I want to face off with clients again. I love big and complicated things.”

Both Zames and Dimon portrayed the separation as amicable. While Zames said he doesn’t have a specific position secured, he’s interested in roles at technology and finance firms.

Dimon, who’s been CEO since late 2005, has watched several of his most likely successors move on in recent years, taking top posts at other firms. Frank Bisignano stepped down as co-COO in 2013 to run First Data Corp., and Mike Cavanagh left in 2014 to take senior roles at Carlyle Group LP and later Comcast Corp. Jes Staley, who climbed JPMorgan’s ranks over more than three decades to run its investment bank, departed in 2013 and is now CEO of Barclays Plc.

“My first reaction is that Jamie is well ensconced and no one sees any upward mobility,” Charles Peabody, an analyst at Compass Point Research & Trading, said in a phone interview. “Most of these guys who leave are looking to run something and they must be concluding on their own that Jamie is not going anywhere. ”

Dimon Sad

Responsibility for the operations that Zames oversaw -- a sprawling list that includes technology, real estate, the chief investment office and military affairs -- is being split among other top executives. He will remain at the New York-based bank in the coming weeks to help with the transition. There are no immediate plans to name another COO, Zames said.

“Matt has worked tirelessly across many disciplines to help make us a better company,” Dimon, 61, said Thursday in a memo to staff. “While I am sad to see him leave, I respect his decision and all he has done.”

Zames, who wears his hair in a military-style buzz cut, can recite figures from financial supplements and historical dates, especially tied to wars, with equal ease. He’s known internally as a zealot for efficiency, slashing what he called “business as usual” expenses to help fund technological investments. While that could make him unpopular to some, a recent visit to JPMorgan’s fixed-income trading floor to show a reporter new cloud-based turrets resulted in impromptu applause from the firm’s traders.

He could take over just about any type of business after such a prominent post at the nation’s biggest bank, said Jeanne Branthover, a managing partner at New York-based executive-search firm DHR International.

“Companies want superstars, and they’re willing to take them from different industries,” she said. “He’s got so many talents and is so highly regarded that I would think there are lots of companies, not just in financial services, looking for him to be a leader.”

Uber’s Opening

He could, for example, join the tide of top Wall Street executives heading to Silicon Valley. Morgan Stanley’s finance chief, Ruth Porat, jumped to Google two years ago. Goldman Sachs Group Inc. bankers Anthony Noto and Adrian Perica found seniors posts at Twitter Inc. and Apple Inc. And AirBnB’s finance chief, Laurence Tosi, came from Blackstone Group LP.

There already are a variety of potential openings. Uber Technologies Inc. CEO Travis Kalanick has hired a search firm to find a COO. Aluminum parts maker Arconic Inc. needs a CEO after Klaus Kleinfeld left over a battle with hedge fund manager Paul Singer. And closer to Wall Street, Zames has long known Vincent Viola, the billionaire founder of Virtu Financial Inc., who has considered leaving the algorithmic market-making firm.

JPMorgan and Virtu strengthened ties during Zames’ tenure. The bank served as joint-lead manager on Virtu’s initial public offering in 2015. Virtu soon won a mandate to oversee trading of the lender’s shares on the New York Stock Exchange. And Virtu won business routing orders from JPMorgan in the $14 trillion U.S. Treasury market.

Exit Package

Zames will receive three cash payments over the next two years totaling about $10 million, the bank said in a regulatory filing. He’ll also continue to vest in equity awards worth more than $38 million as of Thursday’s close, according to data compiled by Bloomberg. As part of the agreement, he won’t work for a competitor through Feb. 1, and can’t solicit former clients for one year or employees for two years after completing a 90-day garden leave.

Zames was named co-COO in July 2012 in the wake of JPMorgan’s London Whale trading loss after starting the year as co-head of the fixed-income business. It was a rapid rise for the executive, who went from running a trading business to overseeing senior managers, including the chief financial officer and head of regulatory affairs.

“He was the fairly clear No. 2,” said Brian Kleinhanzl, an analyst at Keefe, Bruyette and Woods. Now, he’s adding to a pattern at JPMorgan, following previous operating chiefs who moved on rather than waiting for the CEO’s office to open. And in a perverse way, that’s good news for shareholders who like Dimon’s stewardship, the analyst said, because “it gives you some level of confidence that Jamie’s not leaving.”

The stock rose 1.2 percent on Thursday. Dimon has said he would like to stay for another five years or so.

Even with the departures, the bank’s bench of top executives isn’t depleted. In recent years, analysts and people close to the firm have mentioned consumer bank CEO Gordon Smith, Chief Financial Officer Marianne Lake, asset-management head Mary Callahan Erdoes, investment bank chief Daniel Pinto and Doug Petno, who runs the commercial bank, as potential successors. After Dimon was diagnosed with throat cancer in 2014, the bank’s board emphasized that it works hard to ensure leadership talent is on hand in case of an emergency. Dimon later said tests showed no evidence of the disease in his body.