Twenty-two months after the thus-far disappointing merger that created J.P. Morgan Chase & Co., the company is ready to go after acquisitions, but it will stress fill-in consumer and retail banking deals in markets where it is established.
Donald H. Layton, vice chairman for consumer and retail banking at Morgan Chase, said at a conference in Boston on Thursday that the company has “been interested in doing small acquisitions” in New York, New Jersey, Connecticut, and Texas.
Morgan Chase has done some deals, but it generally has not initiated them. “I’d rather be more aggressive in looking for deals outwardly,” Mr. Layton said.
The company is facing immense pressure to raise its stock price and profits. Its third-quarter earnings fell 91%, to $40 million, from a year earlier on mounting losses from corporate lending and private equity investments.
But consumer banking has been a bright spot. In the first three quarters the retail bank generated net income of $2 billion, up 63% from a year earlier, Mr. Layton said during a presentation at the BancAnalysts Association of Boston conference.
Mr. Layton took over as retail chief in May as part of a reshuffling of top executives at Morgan Chase, trading roles with David A. Coulter. At the same time, Geoffrey T. Boisi, who had co-headed investment banking with Mr. Layton, left the company.
Morgan Chase’s retail operations have been in something of a turnaround mode since Mr. Coulter, the former chief executive of BankAmerica Corp., joined the old Chase Manhattan Corp. from Beacon Group and took charge of the consumer business.
In the summer Morgan Chase ran a telephone and mail campaign to combat Washington Mutual Inc., which has invaded its New York retail banking turf by acquiring Dime Bancorp. It promised to give people $200 for switching their accounts from Wamu or Dime to Morgan Chase.
On Thursday, Mr. Layton outlined some areas of the retail bank he expects to generate revenues, including prime credit, home equity, fund management and transaction accounts. The company will also look to the mass-affluent, middle-market, and small-business segments, he said.
But areas such as single stock brokerage, mass-market investments and insurance “manufacturing” are less likely to be profitable, he said.
“We have lots of things in which we can do better,” Mr. Layton said. For example, he said, “Chase got the Internet wrong for consumers the first time around” because it overemphasized investments and initial public offerings.
Morgan Chase is looking to hire someone to head its retail marketing effort, which will be run through the branches, Mr. Layton said.
Thomas H. Hanley, an analyst Friedman, Billings, Ramsey, said that Morgan Chase may stress credit card acquisitions comparable to its January purchase of Providian Financial Corp.’s $8.2 billion Providian Master Trust, with 3.3 million accounts.
On Thursday, investors were more concerned with rumors out of Europe that Morgan Chase may have $70 billion of undisclosed derivative losses in the gold market. Joseph Evangelisti, a spokesman for Morgan Chase, called the rumors “irresponsible and false.”
Prudential Securities analyst Michael Mayo blamed Thursday’s drop in Morgan Chase’s stock on the company’s failure to legally force 11 insurers to cover its nearly $1 billion loss on transactions with Enron Corp. The court ruled against Morgan Chase’s second bid for summary judgment late Wednesday.
J.P. Morgan’s stock closed down 6.6%.
