Custody success clears path to top for JPMorgan's Miller

Heidi Miller, a confidant of Jamie Dimon for almost two decades, more than quintupled pretax profit at JPMorgan Chase & Co.'s treasury and custody unit since taking over the division in 2004. Her reward: a newly created job heading the Global Corporate Bank. The role, handed to Miller in a series of senior management changes yesterday, increased speculation that Dimon, the bank's 54-year-old chief executive officer, is grooming long-time loyalists such as Miller -- and possiblyy Mike Cavanagh -- as potential successors to run the second-largest U.S. bank. Cavanagh, took over Miller's job from the chief financial officer post. Miller has been climbing the Wall Street power roster since taking over JPMorgan's payment-processing, custody, and clearing division, called Treasury and Securities Services, six years ago. Since then, she has been ranked among Fortune's “Top 50 Women in Banking” and Forbes's “100 Most Powerful Women.” Last year she topped Crain's “50 Most Powerful Women in New York.” “Going out and doing deals on the investment-banking side generates a lot of press and prestige, but being able to consolidate the back office of a bank, which is what Heidi did, shows a management capability that we should appreciate more, and I think Jamie recognizes it,” said Bradley Hintz, an analyst at Sanford Bernstein & Co. “That portion of the business is not appreciated in the equity markets.” Dimon said in March that he planned to rotate senior executives across business lines as part of a succession plan. Custody Wins The custody business holds and clears securities, cash, and alternative investments for investors and broker-dealers. Combined, JP Morgan's cash management and securities services operation handles an average of $3.7 trillion in transfers daily and has $15.3 trillion in assets under custody. Miller turned the business around and generated a reliably high return on equity throughout the economic crisis, according to Hintz. During her tenure at the unit, revenue rose to $7.3 billion last year from $4.2 billion in 2004, while the division's earnings jumped to $2.1 billion from $372 million in the same period, Hintz said. The business has contributed an average of 9 percent to the bank's total revenue over the past five years, peaking at 11 percent in 2008 during the worst of the financial crisis, he said. Recent custody wins have further boosted Miller's stock within the company. On June 10, JPMorgan announced that it had landed a custody contract with asset manager BankInvest, which has $23 billion of total assets under management and administration. That announcement came the day after the bank was hired by the state of New Mexico to custody some $40 billion in asset. And in May, Transatlantic Holdings hired JPMorgan to provide global custody services for the reinsurer, adding approximately $11 billion to the bank's assets under custody. 'Worth Staying' Few executives have worked with Dimon as long as Miller, apart from Dimon's former mentor, Sandy Weill, who fired Dimon from Citigroup Inc. in 1998. And few have been as loyal. Dimon hired Miller away from Chemical Bank as his assistant at Travelers Group Inc. in 1992. Miller was Dimon's chief credit officer and risk officer at Salomon Smith Barney and served as CFO under Dimon at both Travelers and Citigroup. She had stints on her own as CFO at discount Internet travel agency Priceline.com and as a vice chairman at insurance broker Marsh Inc. from 2000 to early 2002, when Dimon lured her to Bank One in Chicago as CFO. He then brought her along as part of his senior management team when JPMorgan merged with Bank One in 2004. “I had a few excursions off the reservation,” Miller said in an interview yesterday. “I've always come back to recognize that sometimes when you have a great boss -- and I do think Jamie is a great CEO, he has huge integrity, great business judgment -- it's worth staying with that person.” Miller doesn't have a formal education in business. She was among the first women ever admitted to Princeton University in New Jersey, where she graduated in 1974 with a history degree, according to Monica Langley's book on Weill: “Tearing Down the Walls.” She went on to earn a doctorate from Yale University in Latin American studies and landed her first job with Chemical Bank in its Latin American division in 1979 as a banker credit trainee. Over There She serves as a trustee at Princeton along with Supreme Court Justice Sonia Sotomayor, who graduated two years behind Miller in 1976, and sits on the board at General Mills Inc. Miller has shown she can manage overseas expansions. Treasury and Securities Services derived 35 percent of its revenue outside the U.S. and had 51 international locations in 2004, compared with 48 percent of revenue and 68 overseas offices last year. “Multinationals operate in sometimes more countries than we do,” Miller said. “We increasingly see our clients look to us to provide services and solutions throughout the world. We want to make sure that we can do it for them seamlessly.” She said the bank has a “good presence” internationally. “The question is, can we accelerate growth plans in Asia, can we accelerate what's going to be growth in emerging Europe and Latin America?” she said. “That's our goal.” Citi's Pie Miller's new business will offer corporate clients investment banking, advisory, debt capital markets, equity capital markets, lending, payments and securities processing services globally, she said. She'll be targeting emerging markets including China, Brazil, India and Russia, regions where JPMorgan will battle Citigroup for business, said Anthony Polini, a banking analyst at Raymond James & Associates Inc. “The projected growth rate for those economies are two or three times greater than the projected growth rates of the U.S.,” Polini said. More than half of Citigroup's total revenue comes from overseas, compared with about a quarter at JPMorgan, Polini said. “This is a key play to get a piece of the pie that Citi has a bigger slice of right now.” Unlike Citigroup, JPMorgan isn't looking to dominate the consumer lending market overseas, said analysts including Paul Miller at FBR Capital Markets in Arlington, Virginia, who isn't related to Heidi. Miller will instead focus on the wholesale banking side, coordinating with Cavanagh and investment-bank chief executive Jes Staley, who will still report to Dimon. She will also chair a new International Operating Committee of the firm's global leaders, focusing on developing international branches across all lines of business, the company said. “I don't think they want to be a Citigroup that wants to run credit card operations in Mexico or run retail banking franchises in Indonesia,” Paul Miller said. “They want to have strategic investment banking relationships in places where it matters.”