JPMorgan's Jamie Dimon succession dilemma

One day JPMorgan Chase (JPM) CEO Jamie Dimon will no longer run the nation's largest and most profitable bank. But when? And who would fill his shoes?

It’s "an issue," said banking analyst Mike Mayo of Wells Fargo. "My best estimate would be the stock declines by 5% if Jamie were to leave suddenly. Which would make him the $20 billion man."

The questions about Dimon's future are gaining urgency as JPMorgan increases its hold over the rest of the industry. The bank's May 1 purchase of failed San Francisco lender First Republic increased its reach and influence while adding more to earnings. It also firmly established Dimon as the industry's rescuer-in-chief.

The 67-year-old Dimon has made it clear he has no near-term plans to leave. He has, however, also openly mused about life after JPMorgan.

"I can’t do this forever, I know that," Dimon told analysts on May 22. "But my intensity is the same. I think when I don't have that kind of intensity, I should leave."

UNITED STATES - SEPTEMBER 22: Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing, and Urban Affairs Committee hearing titled Annual Oversight of the Nations Largest Banks, in Hart Building on Thursday, September 22, 2022. (Tom Williams/CQ-Roll Call, Inc via Getty Images)
Jamie Dimon, CEO of JPMorgan Chase. (Tom Williams/CQ-Roll Call, Inc via Getty Images)

The list of candidates, according to a person familiar with the bank's succession planning, includes longtime JPMorgan executive Daniel Pinto, who could step in if something went wrong suddenly.

If Dimon stays another three to five years, this person said, two consumer-banking bosses are considered frontrunners to succeed him: Marianne Lake and Jennifer Piepszak. Other executives could get consideration if Dimon stays longer.

JPMorgan Chase declined to comment.

Dimon admitted in an interview with Bloomberg last Wednesday that the thought of running for public office had crossed his mind. "I love my country, and maybe one day I'll serve my country in one capacity or another," he said.

Scott Siefers, a banking analyst with Piper Sandler, said investors will "almost certainly" expect a transition period that gives Dimon a long sendoff while providing the new CEO time to prepare for the role.

"It's a tough balancing act," Sieffers added.

Here is a look at how things could play out:

The 2026 deadline

It is possible Dimon, who became CEO in 2005 and is the longest-serving leader of a big US bank, could stay at least three more years. Why? Well, the board has made it clear it wants him running the bank that much longer.

The clue is a special retention bonus of 1.5 million options the board awarded Dimon in 2021. He can't exercise those options until 2026, and he has to stay at the bank the entire time while meeting certain performance targets.

The current expected value of the award is around $49 million, according to Andy Restaino of Technical Compensation Advisors. It cannot be exercised unless JPMorgan’s stock regains $149, its price when the bonus was awarded. The bank's stock closed Friday at $140.47.

But the retention plan does have one interesting provision that allows Dimon to exit earlier: He can exercise the options if he leaves for a government job, according to a regulatory filing. Elected or unelected.

Dimon has frequently been linked over the years to top roles in Washington. During President Obama’s time in office, Dimon was frequently mentioned as a possible Treasury Secretary. Billionaire Warren Buffett even offered his endorsement in 2012, saying Dimon would be the best pick for that job.

On Wednesday another billionaire, hedge fund manager Bill Ackman, urged Dimon to run for president in 2024 as a Democrat, saying he could beat President Biden in the primary election and former President Donald Trump at the general election.

Whenever Dimon does step down, he likely will keep some sway over the board. He currently holds dual titles as chairman and CEO, and JPMorgan said in a 2022 regulatory filing that it would split those roles "upon the next CEO transition."

In that case "the odds are Jamie will become chairman," said the person familiar with the bank's succession planning.

The 'hit by a bus' scenario

Inside the bank there is already a plan for what happens if Dimon gets "hit by a bus," meaning the CEO has to step down under sudden or unforeseen circumstances and a new leader has to be named immediately. Dimon himself has used that phrase in his annual shareholder letter.

These days, that "hit by a bus" replacement is Pinto, a 60-year-old Argentine who is president and COO of the bank. Pinto also is CEO of JPMorgan's corporate and investment bank.

Daniel Pinto, President and Chief Operating Officer of JPMorgan Chase, 
speaks at the Global Financial Leaders Investment Summit in Hong Kong on November 2, 2022. (Photo by Peter PARKS / AFP) (Photo by PETER PARKS/AFP via Getty Images)
Daniel Pinto, one possible successor to Jamie Dimon. (Photo by Peter PARKS / AFP) (Photo by PETER PARKS/AFP via Getty Images)

Pinto's career with the bank stretches back to 1983, when he began working in Buenos Aires as a financial analyst and foreign exchange trader for a predecessor company called Manufacturers Hanover.

Pinto could theoretically run the bank for years if he had to take things over. However, as a person familiar with the bank's succession planning put it, that may not be what Pinto or the board wants.

"Daniel would be very happy to retire with Dimon. He's not the type of person that's clamoring for the job,” this person said.

In 2020, Pinto had his chance to step in when Dimon was struck with a sudden and near-fatal heart injury.

Pinto served as co-CEO for a month along with Gordon Smith, another executive who at one time was also considered a "hit by a bus" replacement for Dimon. Smith retired in 2021.

A planned succession

If Dimon's exit isn't sudden, there are other insiders who could assume the role of CEO within three to five years.

That list includes Pinto along with Lake and Piepszak, the co-CEOs of JPMorgan's consumer and community banking division. Lake and Piepszak are considered the top contenders.

"They're probably the frontrunners," said the person familiar with the bank's succession planning.

J.P. Morgan CFO Marianne Lake visits the trading floor after ringing the New York Stock Exchange opening bell, Wednesday, Feb. 24, 2016.  (AP Photo/Richard Drew)
Marianne Lake in 2006, when she was JPMorgan's CFO. (AP Photo/Richard Drew)

The two executives have a lot in common.

Both are 53 years old and both previously served as the bank's CFO. In 2021 they became co-CEOs of the massive consumer business, which serves 78 million consumers and more than five million small businesses.

In May, Dimon tapped Lake and Piepszak to oversee the integration of First Republic, and both hopped on a plane to California the morning the deal was announced. Roughly 1,000 employees of First Republic have been let go, and 21 First Republic branches are set to be closed by the end of the year.

There are other executives who could get consideration as well based on the size of the divisions they manage, said the person familiar with the bank's succession planning.

IMAGE DISTRIBUTED FOR JPMORGAN CHASE & CO. - Jennifer Piepszak, left to right, CEO of Business Banking, JPMorgan Chase, Detroit Mayor Mike Duggan and JPMorgan Chase & Co. Chairman and CEO Jamie Dimon participate in a fireside chat at the Masonic Temple as part of Detroit Startup Week on Tuesday, May 24, 2016 in Detroit. (Rick Osentoski/AP Images for JPMorgan Chase & Co.)
JPMorgan's Jennifer Piepszak, left, sharing a stage in 2016 with Detroit Mayor Mike Duggan, middle, and JPMorgan CEO Jamie Dimon, far right. (Rick Osentoski/AP Images for JPMorgan Chase & Co.)

This person said such candidates may include Takis Georgakopoulos, JPMorgan's global head of payments for JPMorgan's corporate and investment bank, as well as global markets head Troy Rohrbaugh and Marc Badrichani, head of global sales and research for JPMorgan's corporate and investment bank.

Dimon himself has made it clear he wants "a reasoned and mature process" instead of a "drama."

In his 2009 shareholder letter, he said “CEO and management succession often seems more like a psychological drama or a Shakespearean tragedy than the reasoned and mature process it should be."

"It is in our best interest to avoid such drama," he added.

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