How JP Morgan is betting on India's new age economy

Jamie Dimon, chairman and CEO of JPMorgan Chase, has always been bullish on India. During the JP Morgan India Investor Summit in late 2023, he highlighted the remarkable growth of JP Morgan's Indian subsidiary, the world's largest bank ($538 billion as of March 4, 2024), over the past few years.

Although JP Morgan primarily focuses on wholesale banking in the country, its target areas go beyond large Indian corporates or multinationals. Emerging as the winner in the Best Foreign Bank category in the BT-KPMG Best Banks and NBFCs Survey 2022, new-age firms and other players in the banking industry who are competitors in certain segments are huge business opportunities for the bank. 23 for the third consecutive year.

„Our [primary] Business in India is wholesale and we will continue to innovate and value-added solutions on the wholesale side of the business… but some of the solutions we develop on the wholesale side of the business are relevant. [other] Banks too,” says Kaustubh Kulkarni, senior country officer-India and vice president-Asia Pacific, JP Morgan.

JP Morgan has been innovating a lot on blockchain, and according to Kulkarni, some Indian banks are currently “assessing” potential partnerships with foreign banks to leverage the solutions developed there. „We can be a technology partner for an Indian bank where they use the solutions we develop for their customers and clients,” he says.

This is significant as JP Morgan's strategy goes beyond being the financial services partner of choice for Indian companies. This includes collaborating with them as an innovation or technology partner. Currently, the financial services element dominates the two business models, accounting for 98% of the bank's total business. „It's important that we do 2% because it keeps us ahead of everyone else,” says Kulkarni.

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Interestingly, the bank scored high on various parameters including growth in operating profit, absolute increase in CASA market share, three-year CAGR of total deposits, cost-income ratio, return on assets and return on capital employed. . However, this in no way implies that the bank is not focused on innovation. “As a bank counterparty, we can do many things. We also want to see what more we can do with the technical capabilities and solutions we have developed and deployed for ourselves,” says Kulkarni.

With a strong focus on the new age economy, JP Morgan is now putting more emphasis on tapping into emerging opportunities following the banking crisis in the US. “We continue to focus [emerging companies] And the focus is only going to increase because of the challenges we see around the world. We are now working with many companies. Many US companies that were previously banked by other banks are now our clients. Some of them [companies] The Indian environment also needs to have an active ecosystem,” explains Kulkarni.

In 2023, three major banks—Silicon Valley Bank, Signature Bank, and First Republic Bank—failed, opening business opportunities for other major banks, including JP Morgan.

According to Kulkarni, the multinational bank has reached critical scale and scale in the new economy segment in the US, and the benefits are visible in other key markets, including India. „We have critical scale in the new-economy segment in the U.S., and the net result is that we provide a very competitive product and solution for new-economy companies worldwide,” he says, adding that there are four to five critical markets. including the UK, Israel, the Middle East and India.

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The new-age firms offer not only banking business potential for JP Morgan, but also broader opportunities in investment banking and capital markets. The Indian arm of the global bank is already a leader in the foreign banking sector when it comes to market share in segments such as Foreign Portfolio Investor (FPI) transactions in the capital market and acting as a custodian for such foreign investors. It has a market share of 23-25% in the security business. „As India grows and more new-age companies grow, the need for capital and partnerships will increase, and we will play a key role in all aspects of lending, corporate banking and investment banking to engage with companies,” says Kulkarni. .

Going forward, the bank intends to focus more on financial inclusion and energy transition, while continuing to advance in both traditional and investment banking. Kulkarni is optimistic about the current growth prospects in the banking sector in India. According to him, a lot can happen in terms of diversification, while growth can be scaled. „This is one of the best periods of growth for banks. We are probably in the early to mid-cycle. Growth on the asset side will be healthy, and on the liability and deposit sides, it will be more reasonable. Overall, there will be no NPA build-up, but somewhere around the edges you will see NPA build-up. Some NPA challenges It doesn't mean it will come immediately,” he says.

There will be a lot of investment opportunities from the private sector, resulting in funding opportunities for the bank from good quality companies, adds Kulkarni.

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This certainly bodes well for JP Morgan and the Indian banking fraternity in general.

@Aasishrukhaiyar

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