(JPM) JPMorgan Chase Changes Retail Management

On Tuesday, JPMorgan Chase & Co. (JPM) announced the shuffling of its retail banking management. The company has taken such a step to bring in-house talent to the fore and rebuild its business, which is still wrestling with soured mortgages.

Mainly, Charlie Scharf, CEO of retail financial services, will move to the company’s private equity arm, One Equity Partners. Scharf’s retail banking responsibilities will be distributed among three internal executives. Heidi Miller, head of the company’s international business, will retire from the bank early next year.

This marks a remarkable management reorganization as it was one of the most stable executive groups centering JPMorgan’s CEO Jamie Dimon. In fact, the core team had a long-standing association. Prior to joining JPMorgan, this core team has worked in Chicago-based Bank One Corporation after working in Citigroup Inc. (C).

Todd Maclin, head of JPMorgan’s commercial bank, is in line to head the retail financial services. He will be responsible for the company’s branch network, small business lending, private banking and marketing.

The CEO of card services, Gordon Smith will handle JPMorgan’s auto finance and student lending businesses along with his current responsibilities.

Chief Operating Officer Frank Bisignano, who was assigned to the retail banking division in February to address problems in JPMorgan’s mortgage business, will continue in both roles.

Though Scharf has significantly increased retail bank branches in his tenure of nine years, the business is ridden with mortgage issues as a result of the housing crisis. Overall, the business generated a loss of $208 million in the first quarter. As a result, Jamie Dimon felt that a major change in management is required.

Maclin has plans to continue expanding JPMorgan’s retail branch network by 350 to 400 annually with extra focus on California and Florida. We will have to wait a while to see how he addresses issues related to mortgages.

JPMorgan also said that its investment banking head, Jes Staley, will oversee its international business after Heidi Miller retires.

This is the second year in a row that JPMorgan has carried out a management shuffle. The bank’s main interest in such reorganization is enhancement of expertise in multiple sectors.

We expect Jamie Dimon’s belief on modified retail management to bode well for the segment’s much called for stability. On the other hand, ongoing restructuring initiatives of the company should reduce balance sheet risk and improve its valuation over time.

Nevertheless, there are concerns related to the company’s financials being marred by new regulatory restrictions, intense pricing competition and its inability to enhance shareholder value.

Currently, Morgan Stanley retains a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating. Also, on the long-term basis, we maintain our “Neutral” recommendation on the stock.

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