Jamie Dimon formally became CEO of J. P. Morgan Chase on Jan. 1, 2006, and Lloyd Blankfein took the reins of Goldman Sachs just six months later. Both executives have successfully steered two of the world's most celebrated financial institutions through the most turbulent decade for banking since the 1930s.
Now that the external environment is finally improving for their sector and their companies' respective share prices have responded accordingly, is it time for these executives to bow out on the perfect high? The median tenure of an S&P 500 CEO is just four years; these two have each been around for 12.
And if they do decide now is the time, who are the leading contenders to replace them?
It is hard to decide who handled the 2008 financial crisis better.
The fact that Blankfein's Goldman, with a market value of $96 billion, was able to repay the U.S. government's "bailout' funds in less than 12 months (funds which, to this day, they deny they ever needed) and then turn 2009 into a year of blowout profit relative to the industry raised his profile in the ranks of Goldman's greats.
He managed this feat even as the crisis claimed the stand-alone futures of other pure investment banks such as Lehman Brothers (which went bust), Merrill Lynch (which was acquired by Bank Of America) and Bear Stearns (which was acquired by J.P. Morgan).
Morgan Stanley is the only true survivor alongside Goldman, and it took a change in CEO and major restructuring to try to catch up. Its share price still lags Goldman's from the pre-crisis peak.
Dimon's execution was also outstanding, particularly given that he took on two faltering banks in Bear Stearns and Washington Mutual, increasing J. P. Morgan's already large exposure to the struggling housing market. The bank, which has a market value of $375 billion, emerged within a number of years with a "fortress balance" sheet.
The subsequent years of extreme regulatory hurdles, significant fines, and politically charged Congressional hearings may also have led to the departures of lesser leaders. But Dimon and Blankfein fought on in a way that Vikram Pandit of Citi, Ken Lewis of Bank Of America and John Mack of Morgan Stanley did not.
In the last seven years, Dimon's outperformance is hard to dispute. J. P. Morgan's share price is up 217 percent to Goldman's 67 percent. Both banks are preparing to report fourth quarter and year-end 2017 financial results in the coming days.
That said, it is important to highlight how impressive Blankfein's performance is relative to the rest of the pack. Goldman's stock is up 89 percent since he took over. Morgan Stanley is up 31 percent in the same period, while Bank of America and Citi are both down (Citi is still down some 83 percent despite its recent recovery). Indeed Blankfein's starting base was already high given that Goldman was up 130 percent from its 1999 IPO to the time Blankfein became CEO.
Comparing stocks (price moves June 2006 to January 9, 2018)
Bank of America -22.77 percent
Citi -82.54 percent
Goldman 88.88 percent
J. P. Morgan 232.52 percent
Morgan Stanley 31.13 percent
Wells Fargo 151.04 percent
The market share of some of Goldman's key businesses is another focus of comparison. From 2010 through the first three quarters of 2017, Goldman's share in stock trading fell to 15 percent from 19 percent, according to Instinet. In fixed income, share fell to 7.5 percent from 12 percent.
J.P. Morgan's share, on the other hand, rose to 13 percent from 11 percent in equities, and rose to 19 percent from 14 percent in fixed income.
Indeed all of the major U.S. investment banks saw gains in share over that period apart from Goldman. The total share in all trading for the big five American investment banks rose to 58.2 percent last year from 47.2 percent in 2010.. That is a major blot on an otherwise impressive copy book for Blankfein.
Goldman does remain the leading advisory firm, with 12.8 percent market share in banking compared to to J. P. Morgan's second-place 9.2 percent in the most recent quarter. But that is a smaller part of the pie. Trading remains the key for Goldman despite the recent issues. Some 37.5 percent of total revenue in the third quarter of 2017 came from trading compared to 21 percent for investment banking.
The only way Blankfein could plausibly face direct pressure from shareholders would be if the company was seen to be missing the recently announced $5 billion revenue growth target set out for the next three years.
The very specific forecast, which is rare for Goldman Sachs, came in September 2017 after two dire quarters' of performance. Most analysts agree that the targets are ambitious, and someone will have to take responsibility if they are missed. But that judgement will come in 2019 and 2020.
Dimon's record since the financial crisis is of course not without its errors. Unquestionably the highest profile was the London Whale scandal in 2012 in which a rogue trader, Bruno Iksil, was able to lose a massive $6.2 billion before Dimon, his lieutenants and the company's risk management systems noticed.
The bank ended up paying a fine of $1 billion for violating securities laws, while Dimon was forced to take a pay cut. He maintains that the company itself was never at risk, but the pressure on him was immense at the time, and the firing of some lieutenants brought him to tears on one occasion. He said in an interview last August that Iksil was not the guy to blame.
Regardless of their troubles, both men have the power to decide when it is time to go. This week, CNBC asked Dimon how many more years he wanted, and he said, "I love our company and our people and being part of this outstanding team. I won't speculate on timing, and important to note that I serve at the pleasure of the Board."
It is a board he has shaped over the years and on which he serves as chairman, of course. But he claims that there is no other job in the world he would rather do.
At age 63, estimates for Blankfein's departure range from one to three years. For Dimon at 61, the top end is more like five years. The median age of an S&P CEO is 57, according to Equilar.
Blankfein showed his determination to stay a year ago – when his long-time second in command, Gary Cohn, was offered a job at the White House. Sources say Cohn would have stayed at Goldman had he been promised the CEO role within in two years. Such a promise was not forthcoming from Blankfein.
Who's next in line?
So, while they are both still very much in control, the incentive to bow out for Blankfein a little sooner is higher.
The pressure on Dimon internally is also lower. His underlings are more relaxed about the immediate years ahead. At 59, Gordon Smith, CEO of J. P. Morgan's consumer and community bank, is the oldest of Dimon's direct reports. He would also be the most likely candidate to take over if Dimon were to leave tomorrow.
But those close to Smith say he does not have a big ego and is not itching to become CEO. Sources say he was consulted for the American Express CEO job late last year but turned it down quickly.
Daniel Pinto, the 55-year-old head of investment banking, is also content where he is. His performance has been very strong, but he hasn't sought much public praise for it, and thus probably gets less attention than deserved.
In another three years, Mary Erdoes (50 and the CEO of J. P. Morgan Asset Management), Marianne Lake (48 and CFO) and Doug Petno (52 and CEO of JPM Commercial Bank) come into play.
Erdoes is often rightly mentioned as a potential successor. However, she leads one of the smaller business lines (12.6 percent of total revenue), and it would be a tall order to move from asset management to run an investment banking and retail banking goliath.
Petno is highly thought of – particularly internally – and has a good chance. But Lake is the favorite of this age group. As CFO her exposure to investors is high, and her coverage internally is broad.
A key thing to watch will be any changes to business lines this year and next giving any one of this younger leadership group broader exposure. It is also thought that Dimon would love to anoint the first female CEO of a major American bank – something I asked him about this week and he went further than just one.
"I'd like one day to see women as CEOs of at least three of the top six banks." Already he is proud that over 50 percent of his direct reports are women.
Another reason for the patience of this crop is the pure size of J. P. Morgan. Revenue in corporate and investment banking in the third quarter of 2017 was $8.6 billion. Goldman's entire firm revenue was $8.3 billion.
Pinto already runs one of the biggest investment banks in America. The same can be said of some of the other business heads in their respective fields. As an aside, a senior source has told CNBC that the past media-anointed Dimon 'heir apparents' were wide of the mark. Matt Zames, Jes Staley (now CEO of Barclays), Mike Cavanagh (now CFO at Comcast), Bill Winters (now CEO of Standard Chartered) and Charlie Scharf (now CEO of BNYMellon) were never true contenders, hence their departures. Scharf was the closest but still decided to move on, first to Visa, now BNYMellon.
The current patience of JPM's lieutenants is less prominent at Goldman Sachs. Many partners (of all levels) were surprised that Cohn felt the need to leave, even for a job at the White House.
Other senior departures in recent years, all of whom had the prestigious vice chairman title, included Michael "Woody" Sherwood (co-CEO GS International), Mark Schwartz (chairman of GS Asia Pacific), John Weinberg (co-head of GS Investment Bank) and Michael Evans (chairman of GS Asia).
The latter set of departures were more under the radar than Cohn's, but certainly raised eyebrows on Wall Street, especially the departure of Sherwood, who, like Cohn, had realistic aspirations for the top. Aspirations which were at least in part hurt by GS International's negative publicity in 2016 relating to a lawsuit filed by the Libyan Investment Authority (from which they were exonerated), even if both Sherwood and Goldman said it played no part in his departure.
Either way, many industry insiders have questioned the rationale to remove so much high-powered Goldman DNA so quickly.
If Blankfein were to leave soon then the only contenders are the current presidents and co-COOs David Solomon, 55, and Harvey Schwartz, 53. Schwartz has broader exposure, while Solomon is seen as better with clients having spent almost all of his time in the investment bank.
Both have offices very close to each other, but understandably now compete more than they used to. Neither has a deep background in trading (unlike both Cohn and Blankfein), which means the next deputy would likely come from that background. (Schwartz did spend plenty of time in the securities division, but in role more tilted towards sales than trading).
Which brings us to global co-head of securities Pablo Salame, 51 – the clear candidate for deputy to Solomon/Schwarz given that he is the standout trading candidate. Other outsiders include all the co-head of the investment bank John Waldron, 48, CEO of GS International Richard Gnodde, 57, head of investment management Eric Lane, 43, and CFO Marty Chavez, 53.
One Blankfein favorite is Chavez, who as the firm's tech guru before becoming CFO has achieved a huge amount for the current CEO – but his apprenticeship for the top thus far as CFO (since December 2016) has underwhelmed, and investors and colleagues alike doubt he has the leadership ability. (Salame and Gnodde carry the vice chairman rank; Waldron and Lane do not).
The very fact that only one of the younger crop of heirs is a trader highlights the way in which trading has slipped. From the clear number one around the start of Blankfein's tenure, Goldman sits at fourth or fifth among the big five U.S. investment banks in 2017.
It is fair to say that the last decade has treated pure investment banks (GS and Morgan Stanley) more harshly than universal banks (JPM, Bank of America and Citi), but in the last year or so we have seen evidence that Morgan Stanley has adapted in a way Goldman has yet to do.
Blankfein on Twitter
Hence – Blankfein may decide to go sooner than Dimon. Indeed his recent move onto Twitter – which I am told was because he wanted people to see the real him (read: liberal, witty, playful and opinionated) suggests he may have had enough of the world of investment banking, which has always been secret and confidential.
For decades Goldman more than almost any other bank has prided itself on a cult of secrecy and not attracting attention. So, for the chairman and CEO to begin trolling the President of the U.S. or the British government's plans to leave the EU is quite a major departure from the norm.
It is important to note – Blankfein's departure would only come if he decided to announce it. His accomplishments over the last decade defy almost all recent metrics, share price, trading or other. I asked him this week how much longer he expected to stay. His response: "My wife would like me to do this forever to avoid having to spend anymore time with me than she has to." (And yes, that response was less than 280 characters)
There is of course the chance of outside successors. Could Cohn return to Goldman? Or even move to J.P. Morgan? Could Scharf, Winters or Staley perform so well as CEO of their current banks that they cannot be overlooked? Possible, but highly unlikely.
Dimon says, "I believe we have one of the best leadership teams in our industry. The best candidate is likely to be an internal candidate because we have so many excellent executives here now who could succeed me and do a great job."
Blankfein struck a similar tone. "I strongly believe my successor is at Goldman."
Both men made it clear that it is ultimately a decision for the board.
It would certainly be a demoralizing message to the nearly 300,000 employees across both companies if an outsider were picked for either. But on top of that an outsider is unlikely because of the message the respective boards would be announcing about themselves. In 12 years they have had more time than most to make sure succession planning is in place, and they already know the likely candidates to take over in whatever circumstance materializes.
Bottom line is that it is remarkable that two men in their 60s, who have faced 12 years of the fiercest headwinds imaginable for their industry remain in control of their own destinies. Their legacies are largely written already, but until the latter chapters are inked the business world will remain obsessed with how their succession plans will evolve and emerge – and ultimately who the final victors will be in Wall Street's version of the Game Of Thrones.