Silicon Valley Bank’s collapse in March has prompted J.P. Morgan to tap into the resulting vacuum and grow its business of banking venture capitalists and startups. The largest U.S. bank has filled the niche by hiring dozens of bankers around the world, according to a statement this Tuesday.
J.P. Morgan’s chief executive officer of commercial banking, Doug Petno, said in an interview: “It’s a very rare thing to have this monopolistic player go away overnight. We are open for business and we believe we can be the end-game winner.”
The most notable hire has been that of Silicon Valley Bank veteran John China, who will co-lead the venture capitalist business along with Melissa Smith, head of specialized industries. China has spent almost three decades at Silicon Valley Bank and was most recently its president of SVB Capital. He will now be based in San Francisco and oversee the commercial bank’s innovation-economy team.
The growth strategy for this sector has seen J.P. Morgan bring on about 20 bankers in the U.K. and 10 in Israel for a team in its commercial bank that works with startups. They include former SVB executives such as Rosh Wijayarathna and Folake Shasanya.
The collapse of Silicon Valley Bank gave J.P. Morgan an immediate boost, with most major U.S. banks fielding thousands of calls that week. Several customers told the FT they had looked at opening new accounts in order to diversify risk in the wake of its near-collapse but failed to find suitable alternatives.
J.P. Morgan’s commercial bank serves clients in around 25 countries outside the U.S. with almost 175 client-facing employees. This includes 17 countries in the EMEA region, along with countries across Asia including Japan and China.
The unit had about $847M in international revenue last year, according to an investor presentation. The bank remains committed to servicing startups in China, even as relations between China and the U.S. remain fraught. They are also planning on hiring a banker to the innovation economy team in Shanghai in the coming months.
This push to expand the bank’s reach to startups and venture capitalists comes at a time when consumer deposits are facing headwinds. As PYMNTS reported, Jennifer Piepszak, co-CEO of J.P. Morgan’s consumer and community banking unit, said consumer deposits will be “slightly down” due to factors such as the Federal Reserve’s quantitative tightening program and the Treasury Department replenishing the Treasury General Account. Despite these challenges, J.P. Morgan added two million checking accounts on a net basis last year and is on track to do at least the same this year. Piepszak expressed confidence in the bank’s ability to “win the war for customers.” However, the competition for deposits has intensified, with digital-only banks like Capital One, Ally Financial, and Goldman Sachs’ Marcus reporting quarterly increases in deposits.
Regional banks, on the other hand, are facing two problems: the recent banking crisis that led customers to shift their money to larger lenders and rising interest rates that are causing consumers to move their money to options like money market funds for higher returns. The Federal Deposit Insurance Corp. (FDIC) reported that banks experienced a $472 billion decline in deposits in the first quarter of 2023, the largest decline in nearly 40 years. J.P. Morgan also reported a decrease in deposits, with total deposits at $2.4 trillion, down approximately 8% from the previous year. Despite this, the bank saw significant new account opening activity and deposit inflows, particularly in the commercial bank business banking sector.