Controversial analyst trades barbs with JPMorgan Chase execs over asset management unit

Mike Mayo asks asset management CEO Erdoes how it feels to be 'a 17 P/E company trapped in a 10 P/E company'

Feb 25, 2014 @ 2:49 pm

Mike Mayo, the analyst who sparred at JPMorgan Chase & Co.'s 2013 investor day with chief executive Jamie Dimon, challenged the bank at Tuesday's event about the logic of holding an asset-management business.

Mr. Mayo, an analyst at CLSA, asked Mary Erdoes, CEO of JPMorgan's asset manager, how it feels to be “trapped” in a bank that he estimates is valued at about 40% less than companies in her business, based on price-to-earnings ratios.

“You would probably be worth a lot more as a stand-alone,” Mr. Mayo said. “How does it feel to be a 17 P-E business trapped in a 10 P-E company?”

Mr. Dimon has said clients benefit from the array of services provided by his company. JPMorgan is the largest U.S. bank, and Tuesday's session featured presentations by commercial, retail and investment bankers, along with Ms. Erdoes, who oversees more than $2 trillion. She said her unit helps JPMorgan meet “holistic needs” of customers, and that the valuation hasn't hurt compensation of top money managers.

“We work very hard to deliver the whole company to the clients,” Ms. Erdoes said. “Someday we believe that all the value of this part of the business will be reflected in the stock price.”

JPMorgan has advanced about 21% in the past 12 months, beating the 15% gain of T. Rowe Price Group Inc., while trailing BlackRock Inc.'s 28% rally. JPMorgan trades for 8.7 times reported earnings, less than half the ratio at BlackRock, the world's largest money manager, according to data compiled by Bloomberg.

“The stock has done fine as a competitive matter, against most major competitors,” Mr. Dimon told Mr. Mayo Tuesday. “More than fine, which you've noted yourself in some of your analyst reports.”


In July 2012, Mr. Mayo said Morgan Stanley would be worth as much as $32 if the firm were broken up. The bank, which didn't heed his call, has since more than doubled. The stock traded at $30.04 at 1:30 p.m. in New York. The gain was fueled by improved profitability at its brokerage unit.

Mr. Mayo asked Mr. Dimon at last year's gathering if clients might shift to banks with the highest capital ratios, citing UBS AG as one company that could seek to win business from JPMorgan.

Mr. Dimon countered, “so you would go to UBS” rather than JPMorgan? “I didn't say that,” Mr. Mayo responded. “I said that was their argument.”

“That's why I'm richer than you,” Mr. Dimon said, drawing laughter from the audience.

(Bloomberg News)


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