Responding to Latin America's expanding economy and growing export business, New York-based JPMorgan Chase ($1.6 trillion in assets) has restructured its Treasury & Securities Services franchise to place an increased emphasis on the region.
According to Mike McKenzie, JPMorgan's Treasury & Securities Services and treasury services executive for Latin America, the financial institution's goal is to become a top-tier provider of wholesale banking services to its existing multinational clients in the region, U.S. middle-market companies and local Latin American firms. However, JPMorgan faces a variety of challenges in that part of the world, not the least of which involve technology.
Previously, the bank's Treasury & Securities Services for Latin America were managed as part of the Americas business, McKenzie relates. But, "It was hard to get the right level of focus and attention on Latin America when our business in the U.S. is so big," he says.
By breaking out Latin America as a separate region for the purposes of management, financial reporting and investment, McKenzie continues, JPMorgan will be able to execute its strategy for the area with greater agility. The move also sends a message to the marketplace that the bank is committed to the region, he adds.
The business will be anchored in Sao Paulo and Mexico City, McKenzie says. Local services will be enhanced to provide a one-stop shop in cash management, trade, short-term investments, working capital, lending and foreign exchange, he explains.
An initial offering will be available in Brazil in the first quarter of 2009, McKenzie says. From there, he adds, the bank will build out a regional capability focusing on Argentina, Chile, Colombia and Peru.
However, JPMorgan faces an uphill battle, contends Guillermo Kopp, executive director and global research fellow with Needham, Mass.-based TowerGroup. "Just the three top banks in Brazil [Banco do Brasil, Bradesco and Unibanco] have over 7,000 branches and 50,000 ATMs, and [Sao Paulo's] Banco Itau has a subsidiary called Itau Tech that is one of the top technology companies globally," he says. "So [JPMorgan] is facing formidable local competitors in Latin America."
Kopp stresses that innovative local players already have the technology in place to customize services for the Latin American market, whereas JPMorgan does not. "Unless [JPMorgan] goes and acquires some big player, they have very little chance," he argues. "They don't have the distribution."
And the competition won't just come from local institutions. For example, Citigroup (New York; $1.1 trillion in assets) recently acquired Chile's second-largest banking group, Banco de Chile (Santiago). Other international competitors entrenched in Latin America include Santander, BBVA, Credit Suisse, ABN Amro, UBS, HSBC and ScotiaBank.
According to JPMorgan's McKenzie, however, the bank plans to strengthen its distribution by "localizing" existing products and services. Its trade finance products, he says, will be modified to conform to local practice and law, and new products and services will be developed to accommodate the unique needs of companies in the region.
To provide tailored local, regional and global services, says Leonardo Lima, JPMorgan's head of Treasury & Securities Services in Brazil and treasury services product executive for Latin America, the bank will have to modify its technology platforms. A particularly important issue, he notes, is the fact that the bank lacks a local language solution.
JPMorgan's Internet banking platform for commercial clients, for example, currently is available in English and some Asian languages, but it is not available in Portuguese or Spanish. If JPMorgan is to succeed in Latin America, Lima says, "We need to have local capabilities and features that allow us to provide support from a country level."
Pointing to JPMorgan's global network as well as the success of its multicurrency trade and logistics, payment, and liquidity products in Europe, McKenzie says the bank believes they will sell well in Latin America. He adds that a U.S. dollar-denominated bank in a region where that currency dominates trade and investment flows should have some advantage.