How JPMorgan and Blackrock execs are thinking of playing the massive wave of money-manager mergers (BLK, JPM)

BlackRock CEO Larry Fink and JPMorgan CEO Jamie Dimon.

Summary List Placement

Top brass at the world’s largest asset manager and largest US bank told analysts on Tuesday that they expect more mergers and acquisitions in the wealth- and asset-management industries, and signaled both firms are on the prowl. 

On the back of Morgan Stanley’s $7 billion deal for Eaton Vance last week, analysts peppered JPMorgan and BlackRock executives with questions about their appetites for deals during their respective third-quarter calls, which helped kick off the latest earnings season. 

“Well, since we have you all on the line, our doors, our lines are wide open. We would be very interested, and we do think you’ll see consolidation of the business,” JPMorgan Chief Executive Jamie Dimon said. 

“But we’re not going to be more specific than that,” he said, adding there were considerations around what type of deal would make sense for the largest US bank by assets, like technology, product, and execution. 

Dimon emphasized early this year that he was interested in carrying out more deals. But JPMorgan, which reported $2.6 trillion in assets under management from its wealth and asset management unit, has yet to announce one publicly. 

“We’re looking at everything,” Mary Callahan Erdoes, chief executive of JPMorgan’s asset and wealth management business, said in February during the bank’s investor day, referring to M&A possibilities. “But we’re looking for adjacent capabilities. We’re not looking for scale.”

Read more: Jamie Dimon says JPMorgan will be ‘much more aggressive’ on acquisitions just days after Morgan Stanley revealed plans to buy E-Trade

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JPMorgan and BlackRock, which both reported better-than-expected earnings results on Tuesday, are coming from different corners of the market, with very different business models.

Still, the renewed focus and speculation around consolidation comes as mounting pressures on small- and mid-sized asset managers have pushed M&A activity to a boiling point this year. 

As fees have dropped for investment products like exchange-traded funds and many customers favor cheaper, passive investing strategies over active ones, fund managers have found it increasingly difficult to turn the profits they did years ago.

BlackRock, the world’s largest fund manager with $7.8 trillion in assets under management, has benefited from the trend toward passive with its iShares business. 

It’s now focusing on growing out its alternatives and private markets units, and has a virtually unrivaled risk management and investment analysis-tech business with Aladdin.

Where BlackRock stands

Executives struck a superior tone on the call with analysts as they leaned into BlackRock’s size and scope. 

The industry is consolidating “in the hopes of creating what we already have,” BlackRock Chief Financial Officer Gary Shedlin, a veteran investment banker who was focused on financial services, said on the firm’s Tuesday earnings call. 

“From our standpoint, our M&A strategy has not changed,” he said, adding the firm is not looking to cut costs through a deal. 

“We are much more focused on thinking about tactical M&A that will broaden our technology capabilities, expand our global distribution reach and potentially scale certain parts of our private markets franchise, but really are much less focused on the pursuit of traditional investment management consolidation,” he said, …read more

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Source:: Businessinsider – Finance


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