Daniel Pinto: Be patient, normalization will happen over time
This interview was first published in China Trade Finance
At the recent J.P. Morgan E-commerce Forum, Daniel Pinto, Co-President of JPMorgan Chase & Co. and CEO of J.P. Morgan’s Corporate & Investment Bank, discussed the re-opening of economies amid the pandemic, the unprecedented monetary support to the global economy, and the firm’s commitment to sustainability.
Q: How do you view the reopening of economies given countries around the world are at very different stages in their recovery? When do you see travel normalizing?
In my view, the normalization of businesses will occur gradually over time. When you look around the world, you see different realities – some countries that have vaccinated between 30-60 percent of their population – like the U.K., the U.S. and parts of Europe – and other countries that have done a lot less. But over time, all countries will make progress and normalization will happen.
The same applies for travel. Over the next several months, corridors will begin to open between countries that are safe for travel and these corridors will also increase over time. So I think we need to be patient and eventually, the situation will normalize.
Q: There continues to be a significant amount of liquidity in the global financial system in an environment of low interest rates. What are some challenges this could cause in the longer term?
The amount of monetary support and stimulus provided to the global economy today is unprecedented, surpassing even that of the global financial crisis of 2008.
The long-term risk is inflation. Inflation, particularly in the U.S., is likely to be high over the next couple of quarters as sectors badly impacted by the pandemic, such as travel, recover. The hope is that inflation will moderate but we don't know for sure as we are in unchartered territory. But this is not something we should be concerned about at the moment; perhaps down the road, from 2022-2023 onwards.
For now, I think we can expect to see, in many regions, strong growth as the global economy recovers from the pandemic, even in the emerging markets as the population gets vaccinated and economies open up.
Q: Geopolitical concerns have been heightened for some time now - the world seems to have become more fragmented even as our clients continue to have global aspirations. How should companies and institutions be managing this risk?
The short answer is prudently and carefully. I think businesses should stick with their long-term strategy and not react to geopolitics in the short term to a point where it could disrupt outcomes in the long term.
J.P. Morgan is in 100 markets around the world and across 60-70 countries, and we have a long-term strategy that we prudently walk towards without going too fast or too slow. If you go too fast and end up getting it wrong, you are reducing the probability of success in the long term.
We have three big economic blocs in the world – the U.S., Europe and China – and there is always going to be a degree of friction between those blocs. So companies will have to learn how to navigate the tensions and do it carefully to allow their businesses to develop over time. At J.P. Morgan, we are guided by our clients, and the ability to operate effectively in all three regions is essential to serving their needs.
Q: Digitalization is a key theme playing out across pretty much all sectors. What are you most focused on at J.P. Morgan?
I think digital transformation is extremely important and should be a core priority at any company. J.P. Morgan is a company with a long history and the result of multiple mergers, so we do have legacy systems that need to be constantly upgraded. We invest heavily in modernizing our infrastructure; from merchant and treasury services to trading to custody – we are building best-in-class platforms that ultimately give our clients real-time insights and the ability to make their own businesses more efficient.
At the end of the day, what clients want is to have a great client experience – how they connect with us and how our products are consumed, so we are constantly thinking about how we can invest to unlock value and enhance client journeys.
We are lucky that we operate at scale and have the ability to invest. We must continue to invest to stay best in class. So investing in digitalization, data and technology – including the talent that is allocated to them – is crucial for the success of any company going forward.
Q: ESG is increasingly important to companies in how they run their businesses. What is your take on the developments in this space, and our role in promoting sustainability?
ESG has become central to both J.P. Morgan’s and our clients’ agendas. There isn’t a single client meeting I’ve attended where this topic doesn’t come up.
We recently pledged to commit more than $2.5 trillion over the next 10 years to address climate change and contribute to sustainable development, including $1 trillion for green initiatives. We are also aligning our financing to the goals of the Paris Agreement to help companies transition and diversify away from fossil fuels over time. We think given our financing and advisory capabilities, we are well placed to be a change agent.
But more important than targets, is how we incorporate ESG practices in our day to day operations. To that end, we’ve set up an advisory group – our Center of Carbon Transition – to focus specifically on helping our clients think through sustainability strategies.
Q: In recent years, we have seen the rapid rise of fintechs, with many having reached or reaching scale. As a bank, do you see fintechs as threats or partners, or both?
I think the worst thing we can do is to be dismissive about competition, especially in the case of fintechs where many of them are amazing companies. I generally work on the assumption that competitors are going to be successful, not that they are going to fail. Otherwise, you will wake up one day and it’s too late, and you’re having to play catch up. So we must continually work to be better, faster and more creative than any competition.
I see fintechs as part of the ecosystem that we operate in, where in some cases we compete against them and in others we provide services to them or partner with them. I think if we all work within the ecosystem in a way where the final output to our clients is the best possible service, we all win.
At J.P. Morgan, we have also fintechs within our firm, such as Onyx, which was launched last year and focused on building the next-generation platforms to enable our clients to deploy innovative ideas at scale. Also, more than 100 fintechs are engaged with us at any one time, for the sole purpose of innovation across our businesses, including wholesale payments and capital markets.