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Written by Ian Weathers
LONDON (Reuters) – Wall Street giant JPMorgan (NYSE) plans to double the size of its workforce at British retail startup Chase to at least 2,000 within two years, despite losses and some investor skepticism, the project’s chief executive told Reuters. .
JPMorgan said it had attracted 1 million customers and more than 10 billion pounds ($10.8 billion) in deposits in the UK’s mobile app bank since it launched last September.
It’s a model the bank wants to replicate in other international markets – despite the rising cost of living crisis that has soured the outlook for retail banks globally.
Britain in particular was hit by a crisis of investor confidence after Finance Minister Kwasi Quarting sent the pound and government bonds into free fall on Friday with a fiscal plan that alarmed markets.
“We want to be international, starting with the UK,” Sanjeev Somani, chief executive of Chase Bank UK, said in an interview at the British bank’s headquarters in Canary Wharf in London on Friday.
“You have to look at a ten-year view. If you look at anything shorter, it won’t lead to the right conclusion…Retail banking revenue collects in the trillions, even outside the US.”
He declined to say where Chase might set off next. Reuters reported this month that JPMorgan is hiring retail bankers in Germany ahead of a possible launch there.
Chase already has 1,000 employees in Britain – out of a total of 19,000 at JPMorgan in the country – and Somani says that number will “at least double” by the end of 2024.
Somani said the project will expand from checking and savings accounts by introducing lending products – likely starting with a credit card – by the end of 2023.
He added that JPMorgan would also look to consolidate its Nutmeg investment business – which it bought for around £700m last year – into Chase during that time frame.
Al Somani started his career in retail banking in India helping Citi launch a much simpler version of “digital bank” – which would send a text message to your bank balance.
“The idea in the medium term is we want to be a full service bank,” he said of Chase, adding that he had no immediate plans to open branches.
Investors’ fears
The project’s rapid growth came at a heavy cost – although one of the world’s largest banks could easily accommodate it.
JPMorgan revealed at its investor day in May that it expects to lose $450 million on the project in 2022 and put cumulative losses north of $1 billion over several years, before predicting that they will break even in 2027-28.
Somani said Investor Day expectations in May remain, but revenue generated from lending and expansion of fee-based services for nutmeg will eventually put it in the black.
Investors have expressed concern about the lack of details about JPMorgan’s digital investments and about its uncertain prospects, adding to the pressure on the international consumer arm to succeed.
Mike Mayo, banking analyst at Wells Fargo (NYSE:), though he added JPMorgan’s US digital expertise and deep pockets could make a difference.
The UK market has seen many aborted attempts to challenge the dominance of major banks – which include Barclays (LON :), Lloyds (LON :), and NatWest. Germany’s N26 pulled out of the country after just two years, while Citi laid off the British retail bank last week.
Chase also faces stiff competition from local digital brands such as Monzo and those offered by large institutions such as savings bank Goldman Sachs (NYSE:). Marcus has grown at a pace similar to Chase’s early on, amassing £13 billion in deposits in Britain in its first 17 months.
Somani said backing JPMorgan gave Chase an advantage nonetheless.
“We are the best funded fintech company in the world,” he said.
(dollar = 0.9235 pounds)
