JPMorgan’s Pinto Breaks Silence on Super League, Talks SPACs
(Bloomberg) -- Daniel Pinto had one of the best seats in the house for the short-lived Super League. At the start of the week, JPMorgan Chase & Co.’s co-president saw his firm bankrolling the breakaway soccer project, which soon inflamed the passions of fans worldwide.
“We were expecting this to be emotional,” Pinto said in a Bloomberg “Front Row” interview on April 20. “We arranged a loan for a client. It’s not our place to decide the optimal way for football to operate in Europe and the U.K.”
Had the Super League panned out, JPMorgan stood to earn millions of dollars in fees and interest payments. Now, with most of the founding teams pulling out, Pinto has to manage any fallout that may extend to the bank.
“It is clear we misjudged the magnitude of feeling that this deal would create, and we will learn from this experience as a company,” he said in a statement Thursday. “In the end, football fans were heard loud and clear, and that’s what matters most.”
The proposed transaction saw JPMorgan receive condemnation from soccer fans and even some clients. While the financial implications for the firm are likely to be limited, the furor comes at an awkward time. The bank, under the Chase brand, is planning to launch a digital-only retail lender in the U.K. this year, the first time it will expand its consumer business beyond U.S. borders.
“How on Earth did they let themselves let this proposal get to where it got?” former Goldman Sachs Group Inc. economist Jim O’Neill said in an interview with Bloomberg Television on Thursday. “It is ridiculous and epitomizes everything that has gone wrong with modern sport, and in particular, football.”
It was a rare misreading of risk by the stalwart head of JPMorgan’s corporate and investment bank. Pinto has survived in that role longer than any of his predecessors under Jamie Dimon by taking a pragmatic approach to unexpected issues, from the heart surgery of his boss, to Brexit, to managing the increasingly disgruntled ranks of junior bankers.
The executive, who normally stays out of the spotlight, remains bullish about the firm’s overall performance, echoing Dimon’s upbeat comments after record revenue last year followed by a strong start to 2021.
“We see a very healthy wallet growth in investment banking this year, and in trading probably more normalized volumes in line with 2019 with some degree of growth,” Pinto said. “With an economy that is growing so well, you are going to have vibrant markets and good client engagement.”
Pinto has been the sole head of JPMorgan’s corporate and investment bank since 2014, and was elevated to co-president along with Gordon Smith, who also runs the bank’s sprawling consumer unit, in 2018. Last year, the pair served as emergency stand-ins for Dimon when he was sidelined for a month following emergency heart surgery just as the coronavirus pandemic crashed through markets and economies -- a crisis in which Wall Street has thrived.
For this year, JPMorgan is expecting a 20% increase in mergers and acquisitions, and a 10% to 20% jump in equity capital markets and high-yield debt issuance, Pinto said, adding that high grade debt won’t see the same jump because so much was issued last year.
He sees two risks that could derail momentum in the markets: out-of-control inflation and a bad turn for Covid-19. Both are low-probability scenarios, he said.
JPMorgan wasn’t in business with Archegos Capital Management, whose implosion last month left several banks picking up the pieces of their prime brokerage businesses that serve hedge funds and family offices. Bloomberg reported Wednesday that the fund’s blowup prompted U.S. regulators to consider tougher disclosure requirements for investment firms.
Pinto said the situation was “not systemic in any way, shape or form” but a wake-up call for prime brokerage units to review their exposures.
“I really doubt that at this time in the cycle there will be a lot of situations similar to this, and if there are I think that all the banks will be already dealing with it, meaning just reassessing the amount of leverage and having transparency across the portfolio of the client, not just the portion you prime,” Pinto said.
Pinto struck notes of caution on Bitcoin and special purpose acquisition companies, two areas of finance that have seen frenzies in recent months. Both are popular choices for the mountain of excess liquidity looking for places to invest, he said.
Bitcoin is “essentially a place to store value, and that value is driven by confidence,” Pinto said. “So the risk to Bitcoin is relatively simple: it’s the risk that something happens to destroy that confidence.”
Read more: Pinto Says Flexible Working Here to Stay
Still, JPMorgan’s strategy around the cryptocurrency -- which Dimon once famously called a fraud -- will be to “accompany the clients,” Pinto said. If institutional customers require JPMorgan to help with custody the firm will work with a “reputable exchange” like Coinbase Global Inc., which went public last week, to do so. At the moment, there is “not much” client demand in the wholesale space but it could increase if Bitcoin keeps performing well, he said.
The hundreds of SPACs that went public last year and in the first quarter, helping juice Wall Street profits, have to find acquisitions within two years. One risks is that SPACs desperate to find targets will end up overpaying, he said.
“Probably some of the SPACs, if they want to be prudent, they may not find a target,” he said.
©2021 Bloomberg L.P.