JP Morgan Chase 2010 Annual Report Download - page 16

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This build-out of our additional locations
results in a huge network eect. For
example, Chinese capital is moving into
Brazil – and we already are on the ground in
bothplaces.Whenwebuildoutourcapa-
bilities in Africa, we also are improving our
servicetoEuropeanclientswhomaybe
looking at investing in Africa.
Alongside these expansion eorts, we are
adding many products. For example:
• Wearebuildingourcapabilitytoprovide
local credit – by establishing capital lines for
subsidiaries of multinational companies and
providing credit to large local companies.
• Wealsoareabletooerourclientssophis-
ticated supply chain finance products
(we recently helped finance Caterpillar’s
suppliersaroundtheworld).
Of course, we also are building the proper
systems, legal teams and operational capabili-
ties to support this bigger network.
In addition to these organic eorts, we are
on the lookout for smaller acquisitions that
can help us accelerate our strategy. For
example, our acquisition of the world-class
Brazilian hedge fund Gávea Investimentos,
aspartofourHighbridgebusiness,dramati-
cally improves our ability to manage money
both for local investors and for those around
the world seeking to invest in Brazil and
emerging markets.
We see global growth opportunities for decades
to come
In the business community and across the
media, we have seen a tremendous focus on
the emerging markets in advanced stages
of development; specifically, Brazil, Russia,
India and China. But this opportunity also
is large in countries like Turkey, Indonesia,
Malaysia and many others – in fact, some
parts of the world are on the brink of mean-
ingful development.
A quick look at sub-Saharan Africa provides
a bit of perspective on the opportunities
beforeusoverthenext20years.Economic
activity in the region is expected to grow
annuallybyapproximately4.7%overthenext
20 years, from $800 billion to $2 trillion, as its
populationgrowsby370millionto1.2billion.
Many nations in sub-Saharan Africa are
adopting better and stronger governance,
and they are fortified by great natural and
other resources, which will benefit their
future prosperity.
Weestimatethatmorethan80%ofourtop
multinational clients are doing business in
sub-Saharan Africa and expect their number
and footprint to grow steadily over the next
20years.Whilewecurrentlydobusinessin
21 of the 49 sub-Saharan nations, we are on
the ground only in South Africa and Nigeria.
Weanticipatethatourclientswillneeduson
thegroundinAngola,Kenya,Tanzaniaand
several other African countries over the next
couple of decades. The investments we make
over the years to enter sub-Saharan Africa
will not materially aect profits in the short
run but will produce a real payo in decades
tocome.Wewillstartplantingtheeldnow,
to be reaped by future generations.
While Developing Consumer and
Commercial Banking Operations Abroad Is
an Option, It Is Not a Strategic Imperative
Over the long term, expanding our consumer
and commercial banking footprint outside
theUnitedStatesisthenextlogicalstep.
This aspiration is a strategic option – not
a necessity. Some businesses need to be
competitive internationally to be successful
– think investment banking, commercial
aircraft and mobile device manufacturers.
But some businesses do not need to be –
thinkretailandcommercialbanking.We
canbeverysuccessfulintheUnitedStates
in retail and commercial banking and never
take them internationally. Therefore, this
aspiration is a strategic option, not a stra-
tegic imperative, to be carried out only if and
when it makes sense.
International acquisitions are riskier than
U.S.acquisitions:Therearefarfeweroppor-
tunities for cost savings, terms for investing
vary from country to country, there is higher
legal and cultural risk, and execution is more
dicult. Therefore, we will acquire these
businesses internationally only if we can do
it right, which means the price needs to be
right, we need to have an adequate margin
for error and we have to have the ability to
execute properly.