JPMorgan plans German digital bank as a start

— • Move will create launch pad for biggest US bank to grow to expand further in Europe

JPMorgan Chase plans to launch a digital bank in Germany as its second international consumer outpost, a move that will create a launch pad for the biggest US bank to expand more in Europe.

The launch is slated for late next year or early 2025. The company expects to target other EU countries after that, say informed sources. JPMorgan Chase has been hiring in Berlin, and intends Berlin to be its base for EU consumer operations, said the sources.

New York-based JPMorgan Chase made its first consumer foray beyond US borders in late 2021 with a digital-only retail bank in the UK offering checque accounts. It plans to add credit cards to that platform this year, followed by personal loans, the sources said. A JPMorgan spokesperson declined to comment on its international consumer expansion plans.

Germany’s banking sector is one of the most competitive. The vast majority of that country’s hundreds of lenders are small and their particular ownership structure — many savings banks belong to municipalities — means they are under less pressure to generate profit.

Foreign banks including Barclays and Goldman Sachs have bulked up in the country as they aim for a bigger slice of the business with German companies and wealthy individuals. Many non-German banks have stayed away from retail, where margins are low, with ING one of the successful exceptions. The Dutch bank now has more than 9million customers in Germany.

JPMorgan has long eschewed the costly, branch-heavy approach that its rivals Citigroup and HSBC used as they expanded overseas in decades past. That restraint proved prescient as the rise of fintech apps in recent years changed the calculus for JPMorgan’s international consumer efforts.

Now JPMorgan is one of the few big US banks expanding its consumer presence internationally. Citigroup is selling off more than a dozen retail units around the world. Goldman Sachs has also said it is pulling back in consumer banking, which included a UK offering.

Sanoke Viswanathan, JPMorgan’s chief strategy and growth officer who oversees its international consumer push, signalled the firm’s ambitions in an investor presentation in May. Since then, Chase UK had more than 500,000 customers and deposit balances of about $10bn, according to Viswanathan’s presentation. While the company expected a $450m pretax loss tied to the effort last year, it expects to break even in five to six years.

“Consumer banking outside the US represents a significant untapped opportunity for the firm,” Viswanathan said at the time. “Historically, banks have struggled to do well in markets outside their home markets in retail banking, but we think this is changing with digital.”

Jamie Dimon, JPMorgan’s longtime CEO, has ploughed money into acquisitions and investments in recent years to build out offerings and fend off competition. In a section on that topic in his annual letter to shareholders last year, he cited the firm’s consumer expansion abroad, touting advantages including a global payments business and an international private bank.

As part of that investment agenda, JPMorgan Chase agreed to buy UK digital wealth manager Nutmeg in 2021, which it is now integrating into its UK platform. That same month in 2021 it took a 40% stake in Brazilian bank C6.

“We have a big product road map ahead of us, including lending products and investment products, and as we build this out, we wanted to complement and accelerate our strategy,” Viswanathan said in May, touting both investments.