JPMorgan Chase - A Tale of Two Mergers

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Case Details:

Case Code : BSTR222
Case Length : 16 Pages
Pages Period : 1997-2006
Organization : JP Morgan, Chase Manhattan, Bank One
Pub Date : 2006
Teaching Note :Not Available
Countries : US
Industry : Banking

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Aquisition Of Bank One

JP Morgan Chase's performance improved in the beginning of 2003. With a better performance in the investment banking segment plus the strong auto loan and mortgage business, JP Morgan Chase recorded a net income of US$ 1.4 billion on total revenues of US$ 7.6 billion in the first quarter of 2003, compared to US$ 982 million (on total revenues of US$ 6.8 billion in the first quarter of 2002).

The company's stock, trading below US$ 20 in 2002, crossed US$ 30 mark in May 2003 but was still less than at the time of the merger with Chase. In May 2003, Harrison hinted at buying another retail bank if JP Morgan Chase's stock price increased further. However, analysts said that Harrison had already made a mistake in acquiring JP Morgan in 2000 and the merged entity was still facing many problems. The integration problems would be exacerbated by another acquisition at this point. Burnham Financial Services Fund Manager Anton V. Schutz, commented, "Given their lack of skill at integration, it's unimaginable that anyone would want to sell to them..."

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The Road Ahead

Though the benefits of JP Morgan Chase - Bank One merger were clear, analysts pointed out a few difficulties that the merged entity might face. JP Morgan Chase did not have significant presence in the retail brokerage business and is clearly behind its competitors in the booming hedge-fund industry.

Its equity underwriting and merger and acquisitions consulting businesses are also said to be not very strong. Dimon could face competition not only from national players, but also from regional players like Commerce Bancorp who plan to establish national presence and are already competing with JP Morgan Chase in many states in the US. JP Morgan Chase had also not opened many retail branches while the rest of the banking industry has been increasing its count of retail outlets.

Also, two consecutive quarterly earnings just after the merger had been disappointing; high merger costs and wages, especially in the investment banking division, had been blamed for this...


Exhibit I: Leading US Banks - Merger and Acquisition Deals

Exhibit II: JPMorgan Chase & Company

Exhibit III: JPMorgan Financial Performance between 2000 and 1998

Exhibit IV: Recent Financial Performance of JPMorgan Chase

Exhibit V(A): JPMorgan Chase Stock Price (1995-2000)

Exhibit V(B): JPMorgan Chase Stock Price (2000-06)

Exhibit VI: JPMorgan Chase Businesses after the Merger

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