Catherine:
Hi, I'm Catherine Guan, a member of J.P. Morgan Investment Bank’s, Corporate Finance Advisory team. Today I'm joined by Carlos Hernandez in this episode of What's the Deal. Carlos is J.P. Morgan's Executive Chair of Investment Banking and Corporate Banking, with the responsibility for our global businesses. He's also a member of our firm's operating committee. Carlos, it is so great to have you here with us.
Carlos:
Well, thank you for having me, Catherine. It's a pleasure to be here.
Catherine:
And with this episode, we're launching a special series, entitled “Conversations with Deal Makers”, where we will speak with the makers behind the deals and delve into the stories behind the headlines. Carlos, you had such a rich and varied experience in over three decades at J.P. Morgan. I want you to start at the very beginning of this journey, the year is 1986, you just graduated from Columbia and joined J.P. Morgan Investment Bank's training program. What impressions did you take away from the training?
Carlos:
Well, listen, J.P. Morgan always had, and it still has today, one of the most famous training programs. People came from all over the world. To me, that was one of the first times I went in there and met people from Saudi Arabia, from Japan, from Brazil, and got to meet so many different perspectives and people. And obviously most importantly, the training, the quality of the training were some of these professors from, different business schools that they taught the classes and, it was a great, great learning experience.
Catherine:
And that quality of the training program has truly stayed consistent throughout the years. When I joined in 2014, my training program had approximately 200 analysts from over 50 different investment banking offices around the world. In addition to the great professors that you mentioned, just being with my fellow trainees, broadened my perspective on everything from how to structure Islamic financing, accords with Sharia, to how Japanese pension funds impact local demand curve.
Catherine:
And Carlos, speaking of the global nature of our business, I want to turn to one of the early transactions in your career. You had started out here in New York, in our Corporate Finance team. Tell us about that one fateful Latin American assignment that turned into so much more.
Carlos:
Yeah. Excellent. Well, listen, I was in the J.P. Morgan, what we used to call the corporate finance group. We was the equivalent of M&A, financial advisory. And I got a call to go help transaction in Mexico because they needed somebody who spoke Spanish.
And I went to Mexico, and it was at that time was when most of the Latin countries had defaulted on their debt because of the dollar debt, as well as some of the companies. So it was the first, transaction that we need to restructure the debt. This company called FEMSA, which is the owner of Dos Equis and the biggest Coca-Cola bottler and all that, and restructuring the debt, to make the company viable, dealing with all the banks. So that was the very first ever debt restructuring of a transaction of a company. And then obviously became the hallmark to be used for governments, in Latin American around the world.
Catherine:
And from that point on, you went on to become the head of our Latin American investment banking practice.
Carlos :
Yes, I was fortunate obviously, as I said, that was the beginning of Latin American. And then that's when we started helping, we could figure out help companies, at the advice how to restructure the debt that gave us, the premises to use to start investment banking, then help companies when they got stronger, how they could grow businesses, then how to raise capital in the public markets, which had been shut down for all these companies. And I was fortunate to run that business for many years, and, evolve from being a debt restructuring into being a pure M&A, Corporate Finance Advisory business around all Latin America.
Catherine:
And one of many remarkable things about your career in addition to the diversity of geographies, is your product experience. And this is so different than many senior bankers on the street who have specialized and risen up in one single vertical. So let's fast forward to the year 2000, as we talked about, you already have great M&A and debt restructuring experience under your belt. How did the opportunity to foray into equity capital markets come about, and what made you say yes?
Carlos:
Yes. So, in 1992, when I was actually doing the work in Latin America, and then I came back to the U.S. and I was doing M&A in the U.S. J.P. Morgan had just received the underwriting powers of the Glass Steagall. And they were setting up the Equity business, Equity Capital Markets. So I raised my hand, that I wanted to be part of that group. I wanted to learn how capital markets, investors value companies. I always been on the side of the corporates, but wanted to understand obviously from the investor side. And that was 1992, which actually coincided with one of my clients that I had advised in Latin America, had wanted to do an IPO, and J.P. Morgan did the first IPO in 1992, this company called bank com.
It was almost a billion dollars. The last time J.P. Morgan had done an equity deal was in 1934. So, it was the very first equity deal that we did, since the security act and the removal of Glass Steagall. I did that, was in capital markets doing a lot of the international capital markets, transactions. I went back to do corporate finance, but then in 2000, with the dot.com, we didn't have enough ECM experience. So they asked me to go run, equity capital markets globally. So that's how I went back to the ECM business in 2000.
Catherine:
That's amazing. And now having been an investment banker for most of your career, it must have been quite an interesting challenge when you then from this point, ventured into sales and trading, when you took on leadership of our Global Equities and Prime Services, how did you approach getting up to speed building consensus and steering the direction of this new business area?
Carlos:
Yes. So, I was fortunate that I went from the investment banking inside to the sales and trading, which are as, you know, two very different tracks. And in 2003, I was asked to run the sales and trading business, which is a totally different business. From like, you're in an office as I am today to there, you're on the floor. and you're in the middle of a load of noise and, transactions, I done almost very instantaneously, and it was really learning a new business. Now, some of the themes about how you advise clients, in the market business is best execution and, making sure that you always giving them idea to generate alpha, they call it in the market business, are the same, like corporates to have a fiduciary responsibility to do what's best for the shareholders.
So some of the themes are the same, but then, I sat down and talked to the whole team over there. And, my view was, anybody who has an idea, what should be the strategies should come to me and, and share their views. And at the end of the day, I'm gonna collect everybody. So I'm gonna decide, and everybody has a vote. Nobody has a veto because we want everybody to own the strategy and to do what we think is the best, for the business. And, back then J.P. Morgan equities business, we were, remember we had just gotten underwriting powers in 1990. So it was really not even teenager, barely getting into the teenagers years.
Our market share was 1% in the market business, equity sell and trading right now, J.P. Morgan is, one of the leaders, so growing that business was exciting, transforming it from, what they call the high touch business to the electronic business, which is what, they used today was part of the whole mission to grow the business.
Catherine:
And Carlos, making sure every voice is heard remains such a cornerstone of your management philosophy in 2016, when we were rolling out the work life balance initiatives investment bank that you championed. I remember being invited to your global banking management meeting. As the junior most person at that table by far, I got my equal time to voice my perspective. So while executing these big strategic visions, you never lost sight the individuals who make up our business.
Carlos:
My view, Catherine, uh, very simple, I want everybody, to think like an owner, everybody owns this strategy, that will be the main reason why we are successful or we fail. And so I always want everybody to feel regardless of what the level is, that they own it. And that's always been my philosophy, whether it was in the markets business, whether it's in investment banking, whether it was when we rolled out, the new policies to do, like a better work life balance. Is I wanted everybody to own it from the most junior person, the analyst who just came into J.P. Morgan, to the most senior person in the group. And that's always been my approach.
Catherine:
And that is such a powerful message to carry throughout the organization. And today, in addition to your oversight of the broad investment and corporate banking business, you do continue to actively engage our clients on mission critical assignments as well. So maybe taking the Saudi Aramco IPO in 2019 as an example, could you tell us about what has changed about how we now help clients execute a deal, versus when you're just building our equity franchise? And what has stayed the same about what it takes to be a trusted advisor?
Carlos:
Yes. Well, I have traveled to Saudi Arabia over many, many years, I mean, decades for business. So when they decided that they wanted to do the IPO of Aramco, they called us, that was 2016. So I was working on that transaction, helping them, how they could take that company public, working with the management of Aramco, and whether, should be listed internationally, domestically, what percentage and all that. So I was part of that team with obviously, all my colleagues from different parts of the world, and helping them until we did the transaction in 2019. So, I was intimately involved in the transaction, obviously my experience at ECM now versus what I had in 1992, when we did the bank Komer is quite different.
Catherine:
Absolutely. As you mentioned earlier on the equity trading side of business, certainly we've witnessed an absolute evolution, but similarly in the banking side of business as well.
Carlos: Yes. I mean, J.P. Morgan is one of the leaders in equity capital markets, we raise money across all the different products, whether it is on the IPOs, whether it's follow-ons, whether it's converts around the world. And it's a business that, we built over the last two decades, and I'm very proud to be part of the team, working with colleagues like you, that are here to deliver to our clients, the best that J.P. Morgan can offer.
Catherine:
And on the best that J.P. Morgan has to offer. I think one of the exceptional points about your career is that you have been at J.P. Morgan for the entirety of over three decades. What is your answer to why J.P. Morgan, when a client asks?
Carlos:
Well, so, I've been here, to be precise 36 years now. And when I went into the training program that you mentioned, it was, uh, July of 1986. I love the culture, the philosophy we use, clients first, I think the mantra that we use first class business and that in a first class way, it is absolutely true and I've seen it. And I always tell everybody, I am at J.P. Morgan, because I like what we do. I like how we do it. I like the people, I like the culture. And you know, it's great to do these for clients, day in, day out, year in year out. And that's why, I love being part of the team.
Catherine:
Great. And in the last few minutes of our episode together, I did want to take a look forward. What are your priorities for the year ahead? Be it professional or personal?
Carlos:
Well, listen, obviously professional. We are continue to grow our business and evolve. I mean, one of the beauties of the investment banking business is always changing. Look at it today. The landscape we're facing, very different than the last two years when we had COVID a few years ago, it was low rates. And, you know, obviously 10 years ago we went to the great financial crisis. So it's helping our clients, how do they position themselves, their businesses for what the landscape might be in the next few years, if you have a, an inflationary environment, it's very different, how you operate your business, how to finance your business, what kind of strategic transactions should you consider? Because technology continues to change businesses across the board. New things are developing. And so it's helping our clients with that. Obviously, we don't control the markets. What we can control is how we can help our clients, how we can be there, giving them ideas in how to continue to position the business for the future.
Catherine:
And is there a personal priority that you have for the year?
Carlos:
Oh, my personal priority. I run all the time and, always try to do better pace than I did before. Everything is about my family and, my wife and kids. If you ask me to say down the road, what I would like to do when I have the time, it will be climb Kilamanjaro, So that's one of my personal goals that I will do sometime in the near future
Catherine:
That is quite a goal to have. And Carlos, you have been such a champion of wellness initiatives for our bankers, knowing that this is such a demanding job. How do you apply that philosophy to your own life?
Carlos:
Well, I run every morning, and I find that's my time when I can think about stuff. I listen to music sometimes, other times I listen to books, I listen to podcasts, and it just for me to get my heart rate going. And the reason why I do it in the morning is because it's the time I can control, I try to play tennis on weekends. And do some other strength exercises but running is my sport.
Catherine:
Great, and knowing music is such a great passion of yours. In addition to banking, I'm curious what songs are featured most heavily on your current playlist?
Carlos:
Oh my God, I was listening to, this week, CCR, Creedence Clearwater Revival, born on the Bayou, and some of the 70s rock was listening to over the weekend.
Catherine:
That is a true classic. And for our final question, I would love to hear knowing that you're such a family man and a proud father of three, as your daughters and son each commence on their careers. What kind of advice have you shared with them?
Carlos:
Well, it's easy advice. I give myself every day and I give to anybody, whenever they ask me is, have a passion and apply yourself. Whatever that passion is, give it all you can. And know that, you will have adversity. The question is when you will have it and how you will respond to it, and what will you learn out of it. And the other thing I tell them, the starting their careers, is, career progressions are, are non-linear, that is, give it the best you can, and continue to learn. Always be curious. Even at my level, I always ask questions like what are the things that, I should be thinking that I'm not, or I don't understand. And to me, curiosity is always good.
Catherine:
And there's no better way to wrap up our episode on that note. Curiosity is always good. Carlos, thank you so much for joining us. It has been an absolute pleasure speaking with you,
Carlos:
Catherine, thank you for having me.
Catherine:
And that's all for this inaugural episode of conversations with deal makers stay tuned for the next part of the series. As we continue the dialogue with the makers behind the deals, and delve into the stories behind the headlines. We look forward to having you join us for the next conversation.
