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