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Jamie Dimon's Thoughts on Chinese Banking System

February 05, 2010
If I were a prosecutor I’d be thanking Al Gore for inventing the internet and email (I don’t know if Mr. Vice President claimed the email invention, but without the internet there is no email). Especially email, because now you can amass evidence of wrongdoing in a very searchable and easy-to-use format. TheStreet.com has dug up a very interesting email that shows what goes behind closed doors when the heads of two of the largest US and Spanish banks get together and talk. Not all of it appears to be legal – there may be collusion and an agreement not to compete for acquisitions.

I get the feeling some laws may have been broken here, but I am not a lawyer (thank God!). But the comment that really drew my attention was not about the collusion, but what the best banker in the country – Jamie Dimon, the head of JPMorgan – thinks about the Chinese banking system. In this excerpt, an employee who was present at the meeting sums up Jamie’s thoughts on China:

Like many others, they are struggling to do business in Asia. Considering to buy a stake in a bank in China and asked if it makes sense to do so at current prices. Jamie replied that the concept is ok, but not now, too expensive, adding that so far "in China it is a one way street" with them wanting to get all and letting you get nothing, and that there will be more and better opportunities when China has a downturn.

Also, too difficult to know what you are buying: many of them do not yet have integrated systems, possibly a meaningful amount of political loans, etc. [emphasis added]

Jamie is not your typical banker; he doesn’t dance (like Chuck Prince) just because the music is playing. His caution, long-term thinking, and contrarianism (he cut off risky lending before everyone else) made JPMorgan a victor in the recent financial meltdown, at least in relative terms. The stock price is still down from the pre-crisis level, but it is not in single digits or the teens, like Citigroup (C ) or Bank of America (BAC). I’d be listening carefully to what he is saying about the soundness of the Chinese banking system.

Vitaliy Katsenelson, CFA

Director of Research / portfolio manager

Investment Management Associates, Inc.

About the author:

Vitaliy Katsenelson

Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of The Little Book of Sideways Markets (Wiley, December 2010). To receive Vitaliy’s future articles by email or read his articles click here.
Investment Management Associates Inc. is a value investing firm based in Denver, Colorado. Its main focus is on growing and preserving wealth for private investors and institutions while adhering to a disciplined value investment process, as detailed in Vitaliy’s book Active Value Investing (Wiley, 2007).


Visit Vitaliy Katsenelson's Website


Rating: 3.7/5 (3 votes)

Comments

LwC
LwC - 4 years ago
"in China it is a one way street" with them wanting to get all and letting you get nothing…"

About 15 years ago or so, during one of my many business trips into China, I was reading an article in a copy of the Asian Wall Street Journal on my flight out of Hong Kong to Beijing. The author was writing about the issues that foreigners were confronted with while trying to do business in China and described one of the issues this way: "If there's a dollar of profit on the table, the Chinese want a dollar and one cent of it."

Even after all these years later, I guess that that statement still rings true.

BTW At that time it was illegal to carry foreign news media into China so I had to leave my copy of AWSJ on the airplane, but in spite of those regulations most hotels that catered to foreigners provided copies of foreign news in their business centers but they could not be removed and had to be read in the business center.

autobotalex
Autobotalex - 4 years ago
Why SHOULD the Chinese make it easy for you to make money there? Would that make you nicer, less arrogant, less prejudiced? If you don't like China, then stop trying to scheme of ways to make money of China. Have some self-respect. The Chinese do not own you a penny.

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