Jamie Dimon succession race narrows

0:28AI pilots are everywhere. If you have already taken our survey about a Saturday FT News briefing, thank you, but you can ignore this. Just tune me out for like the next 10 seconds. For everyone else, take the survey. The link is in the show notes, and by taking it, you could win a fancy new pair of headphones. All right, on to the show. Good morning from the Financial Times. Today is Friday, June 26th, and this is your FT News briefing. The race to succeed Jamie Dimon just got a little tighter, and concerns over SpaceX's bond sales are bubbling up. Plus, the U.S.'s top court is shielding Bayer from litigation related to the weed killer Roundup.

1:10They were in a big crisis, and now this offers them a way out. So at the end, it's great news for the company and for their CEO, Bill Anderson. I'm Mark Filippino, and here's the news you need to start your day.

1:32JPMorgan Chase elevated two possible candidates yesterday to eventually replace Jamie Dimon as CEO. Doug Pettino and Troy Rohrbaugh will serve as co-presidents of America's Biggest Bank. What does that mean for the future of JPMorgan, though? Joshua Franklin is the FT's U.S. Banking Editor. He joins me now to talk about this. Hi, Josh. Hi there. So first of all, introduce us to Petno and Roerbaugh. Who are they and how will they split this role? So this is one of the most closely watched, if not the most closely watched, succession battles on Wall Street. It's also one of the most slowly moving succession battles on Wall Street.

2:08It's been going on for a long time. So the simplest way to think about these two guys is Doug Petno is an investment banker and Troy Roerbaugh is a trader. Up until now, they've been co-heads of the commercial investment bank division at J.P. Morgan, which is about 40 % of the bank's profits. And neatly, it is basically made up of investment banking and trading. Now what's going to happen is Doug Pettno is going to be the sole head of that business. And Troy Rohrbaugh is going to become the head of the Chase consumer business at J.P. Morgan, which is also about 40 % of the bank's profits. In addition to the elevation for Pettno and Rohrbaugh, you also had the announced departure of Marianne Lake, who was also a top candidate for the job.

2:54Her departure was quite a big surprise. Now, you said that this is a slow-moving succession race at J.P. Morgan. You and I have talked about this a couple of times now. How significant is this appointment that we're talking about with Pettno and Rohrbaugh? We won't know how significant ultimately until the day that Jamie Dimon eventually decides to leave. He's now in his third decade running the bank. But this is potentially one of the most significant succession updates in years. Over the decades, there have been numerous potential CEO candidates. But now Jamie Dimon has been there for a long time.

3:29He just turned 70 this year. It's probably a number of years he has left. But probably, you know, it is true that every day he has one less day running J.P. Morgan. and we potentially are getting closer now to finding that successor. And so these are the two guys that maybe are just around at the right time to really be in the kind of final race for the job. So, you know, it sounds like we shouldn't necessarily be starting the countdown clock on Diamond's retirement. No, he has made pretty clear that he has no immediate plans to step down. I think we're still talking more years than anything else with Jamie Diamond staying on as CEO.

4:08And then the other thing I think for people to remember is he's talked very openly about wanting to stay on as executive chair of the board of directors at J.P. Morgan, even after he hands over the CEO job. So it's very likely that Jamie Dimon is going to stick around for a long time. Joshua Franklin is the FT's U.S. banking editor. Thanks so much, Josh. Thanks, Mark.

4:34SpaceX decided to launch a bond sale shortly after its record-breaking IPO. And it's a sign that markets are entering, quote, bubble territory. That's according to the investment chief at insurance group Allianz. He made this warning at the FT's Global Insurance Summit, and FT senior markets correspondent Ian Smith was there. He joins me now. Hi, Ian. Hi, Mark. So let's hear exactly what Ludovic Subran said. When you start to see too much debt being taken to give back this money to shareholders for too long, this looks bubbly. So for me, that's where you see the frothy market. And SpaceX is a good example because everybody has been looking at this IPO whatnot.

5:10And then the guy says, oh, by the way, I want to get 20 billion. And the bond guys are like, but you're losing money. Ian, can you expand on what Subran said and what he was referring to here? Yeah, so the context here is that investors have grown nervous that companies are rushing to issue debt and equity at a time where stock markets have reached record highs and corporate credit spreads, which show the borrowing costs that companies have to pay relative to the government, have fallen to their lowest levels this century. So there is some concern among investors that at these very high valuations, companies are rushing to the market to issue equity or debt, and that could be a signal that frothy markets have reached a top.

5:48And within that, SpaceX coming out with a bond sale, more than$20 billion, after an$80 billion equity issuance has raised eyebrows in the market that it came so soon with a bond deal and has fed that concern that people have that there is this issuance signal about where the market might be headed. Now, Ian, Subron also said at this summit that bond investors would be less forgiving than equity investors of multi-billion dollar losses at SpaceX. What did he mean when he made this distinction? I don't think the point here is that bond investors are supposed to be smarter than equity investors, but it is true that they might be more focused on downside risks or risks to the coupons that they receive on the bonds.

6:31So he was arguing that they would be more scrutinizing of SpaceX's kind of journey to profitability and of its high capital expenditure. It has had to pay a higher borrowing cost than companies with a similar credit rating, partly because some investors are worried about its high capital expenditures. So you can see how some bond investors might be more focused on the company's ongoing ability to service its debt and less focused on the long-term growth story of getting to Mars that might attract some equity investors. There have been a lot of warnings about market bubbles. Suburban is far from the first.

7:06We saw a pretty big sell-off earlier this week. What do you make of all this? I do think there is a question around equity supply. We've seen in prior periods where stock markets have got quite frothy that companies have come to issue. And we saw it in 2022. And that has been a signal that companies are taking advantage of valuations that perhaps can't be maintained. There is also this question of how the US equity market could respond to a rise in US interest rates. Now, that would put more pressure on borrowers, obviously. And if you have more tech groups in the camp of being borrowers, that could put pressure on some of the refinancing.

7:40But it could also pull down on stock market valuations because the present value of future profits is flattered by lower interest rates. So there is that interesting sensitivity in the market right now. You've got a lot of supply coming through and you've got a little bit of unease about what higher interest rates in future could mean. And I think that's the prism with which to look at these SpaceX deals that could tell us a little bit about where the U.S. stock market could be going. Ian Smith is the FT's senior markets correspondent. Thanks so much, Ian. Thanks, Mark.

8:17Bayer, the German pharma group, had a terrific day on the stock market yesterday. Its shares at one point were up 20%. That's thanks to a U.S. Supreme Court decision which ruled in favor of Monsanto. Now, Bayer bought Monsanto back in 2018, and it faces tens of thousands of lawsuits alleging it misled customers on the safety of one of its weed killers. But yesterday, the Supreme Court handed Monsanto and Bayer a clean slate. Florian Mueller covers Bayer in Frankfurt. Hi, Florian. Hi. So I alluded to it a little bit. What is this case all about? Basically, this case is about the allegation that the weed killer Roundup would have caused cancer.

8:59And so they've been battling over this for years. And a lot of different state courts basically ruled that Bayer was liable. and basically they had failed to warn the consumers of the risk that the product might cause cancer. And Bayer has always argued that basically a lot of state regulators, including the EPA and the U.S., had said that their product was safe and that actually they were not allowed to put a warning label on their bottles. And so in the end, this became a matter for the U.S. Supreme Court, which now needed to decide. Right. So a lower court awarded money to a plaintiff that alleged that he had gotten cancer from Roundup, but the Supreme Court overturned that basically shielding Bayer from any similar lawsuits.

9:45Florian, why is this so significant for the company? This is very significant for the company because Bayer has already paid more than 10 billion US dollars in litigation ever since they bought Monsanto. And they might have ended up paying a huge amount more if this verdict now wouldn't have come in and given them a stronger legal argument in the tens of thousands of cases which are still ongoing. Other claimants might find it harder now to sue Bayer. And at the same time, Bayer right now is pursuing another class settlement. So that's why investors are so relieved, because basically the litigation cost risk now is finally known.

10:32And this is not such a grave danger anymore. Yeah, it feels like a weight lifted off the company. What does this mean for Bayer going forward? So the verdict of the US Supreme Court is the first step. Now the next step will be the finalization of the settlement, which is expected for the upcoming weeks. And once all of that is settled, then basically Bayer can go back to focus on its turnaround. because over the last couple of years, because of all of this litigation going on, the company was pretty much barred from doing anything else. They were in a big crisis and now this offers them a way out.

11:19They can probably continue to produce glyphosate, which is the active ingredient in Roundup. They can focus also more on the pharma pipeline. It might actually free up some money to pay back a huge amount of debt. So at the end, it's great news for the company and for their CEO, Bill Anderson. Florian Muller is the FT's Frankfurt correspondent. Thanks so much, Florian. Thank you. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back next week for the latest business news. The FT News Briefing was produced this week by Sofia Ahmed, Sonia Hudson, Katya Kumkova, Fiona Simon and Victoria Craig.

12:00I'm your editor, Mark Filippino. Our show is mixed by Alex Higgins and Kelly Gary. We had help this week from Peter Barber, Michael Lello, David Da Silva, and Gavin Kallman. Our intern is Cole Van Miltenburg. Our executive producer is Topher Forges. Flo Phillips is the FT's global head of audio. And our theme song is by Metaphor Music.

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