AT J.P. MORGAN, LOOK OUT FOR NO. 2
By David Stires

(FORTUNE Magazine) – WHEN J.P. MORGAN CHASE ACQUIRED Bank One this year, the plan called for William Harrison, J.P. Morgan's 61-year-old CEO, to cede his throne to Jamie Dimon, his counterpart at Bank One, in 2006. Until then Dimon would serve as president and COO. But Dimon, 48, has been flexing his muscles lately, leading some to believe the brash Queens native may take over sooner than planned. Citing Shakespeare, Sanford C. Bernstein analyst Brad Hintz says of Dimon, "Yond Cassius has a lean and hungry look ... such men are dangerous."

First came news in mid-September that the bank is scrapping its $5 billion technology contract with IBM after concluding the work would be better handled in-house. There had been widespread speculation that the deal would be canceled following the Bank One merger. Dimon and chief information officer Austin Adams, who also came from Bank One, have long opposed outsourcing. In 2002 they ended Bank One's contracts with IBM and AT&T, arguing that technology is so important that banks should keep control. This time they killed one of the largest outsourcing contracts in financial services and will transfer the merged bank's tech requirements to its own system. Then came a surprising shakeup in the top ranks, the first significant management shuffle since the merger was announced in January. Dina Dublon said she is resigning as chief financial officer at year's end and will be replaced by Michael Cavanagh, now head of middle-market banking in Chicago, and a Dimon loyalist. A 23-year J.P. Morgan veteran, Dublon, 51, is one of the top female executives on Wall Street and a regular on FORTUNE'S 50 Most Powerful Women in American Business list. (Her departure meant she didn't make the list this year.) Most recently she helped steer J.P. Morgan through the Enron debacle. Dublon says the decision to step down was "totally mine" and "totally voluntary," and was not related to the merger. Having seen the bank through the first phase of the merger integration, she says, she wants to "step off the treadmill."

Installing an eager, strong-willed No. 2 and telling him to wait around two years before taking the top job rarely works. Back in July 2001, when Merrill Lynch named Stanley O'Neal president, the original plan was for CEO David Komansky to groom O'Neal for three years before he retired. But Komansky announced his resignation just a year later. By December 2002, when O'Neal officially entered the corner office, he'd already replaced virtually the entire management committee with a close-knit cabinet, known as the "Taliban" for its cost-cutting zeal and disdain for the old Mother Merrill.

Dimon, in many ways, is already running the show at J.P. Morgan. Attend any investor conference and you'll see star-struck analysts flocking to Dimon rather than Harrison for their information. "It's clear that Dimon has taken control," says Richard Bove, an analyst at Punk Ziegel & Co., a New York City research boutique. Analysts say that in the coming months Dimon will continue slashing costs as he seeks to meet the merger savings target of $3 billion. There's also speculation that he may be looking to acquire a retail broker that, like Citigroup's Smith Barney, would help distribute the firm's mutual fund and life insurance products.

A J.P. Morgan spokesman insists the bank's succession will be carried out as planned. One thing that has changed: In July, Harrison increased the number of job cuts to 12,000, from a previous 10,000. That's one decision no CEO--or No. 2--ever likes to make. -- David Stires