Ten years after it reorganized worldwide operations according to products and centralized its management in New York City, J.P. Morgan & Co. is reinstalling a regional structure and giving local staff more leeway in running the bank.
The 180-degree turn might seem odd, since it's been fashionable in banking over the past few years to run everything along product lines.
American Express Bank Ltd. became the latest convert to this strategy earlier this month when it, too, announced it was realigning worldwide operations according to product.
But analysts say the shift at Morgan, which includes a 5% reduction in its staff of 17,000, is the first major reshuffle by Douglas A. Warner since he took over as chairman of the bank in January. And it constitutes a tacit admission that a product-oriented system isn't working the way it should.
They add that in the hectic race to convert itself into an investment bank, Morgan has been slow to build sales and distribution channels suited to its new role as a capital-markets-oriented institution. Morgan simply has too many people out in the field selling specialized products like equities or derivatives, and not enough people familiar with a broad range of products who have enough strong relationships to cross-sell different products to the same client.
As Mr. Warner himself acknowledged in his letter to shareholders released this month: "Although clients place their first call to Morgan for a growing variety of needs, many still turn to us for just one or two services. The potential to expand relationships across our now extensive global product line is great."
A Morgan spokesman added: "We felt we could be even more client focused by concentrating on three main geographic regions and enhancing our cross- selling."
As part of the reorganization, Morgan has set up three regional banking units: one for the Americas, one for Europe, the Middle East, and Africa, and one for Asia.
The bank named Thomas B. Ketchum, 44, a former head of the firm's corporate finance group for the Americas, to head up that unit. He will be based in New York.
Walter A. Guber, 47, was named head of the bank's operations in Europe, the Middle East, and Africa. He formerly ran Morgan's corporate finance and advisory activities in Europe. Mr. Guber will be based in London.
Peter L. Woicke, 51, was named senior executive of Morgan's business in Asia. Mr. Woicke, who will be based in Tokyo, previously headed the firm's global markets group and has a strong background in both corporate finance and capital markets.
Six other executives were also promoted to head up specialized business departments.
The regional heads as well as the heads of individual departments will report directly to Mr. Warner. One of the still unanswered questions is what responsibilities the former executive committee, made up of vice chairmen Kurt Viermitz, Roberto Mendoza, and Rodney Wagner, will play in the new structure.
A Morgan spokesman declined to comment on speculation that the three have been sidelined, but emphasized that they retain substantial responsibilities for mergers and acquisitions, emerging markets, and global trading.
"One of the main goals of the restructuring is to share responsibility with many more hands," he said. That would make Morgan even more "like an investment-style partnership."
Analysts note that the changes have eliminated a layer of management. And they remain convinced that the executive committee members will continue to play critical roles as Morgan's roving ambassadors arranging big-ticket deals. They also decline to term the changes an upheaval, saying it represents an adaptation to meet market demands.
"It's part of an ongoing evolution," said Raphael Soifer, a banking analyst with Brown Brothers Harriman. "Morgan has traditionally been organized around relationships, but they've gotten away from that in recent years."
However, analysts also believe this is unlikely to be the last change at Morgan and note that Mr. Warner has an awful lot of people reporting directly to him, possibly more than he can handle.
They add that the new structure will entail substantial reorganization out in the field and that Morgan still has to succeed in boosting revenues to compensate for the costly investments and operating expenses it has built up over the last few years.
"Morgan's problem is expenses," remarked David S. Berry, a banking analyst with Keefe, Bruyette & Woods Inc. "One approach would have been to do it (cut expenses) on the cost side and the other to do it on the revenue side. This appears to be part of an effort to do it on the revenue side."