J.P. Morgan Chase's Sapphire Reserve Card Gets a New Chief

By Emily Glazer and AnnaMaria Andriotis Features Dow Jones Newswires

J.P. Morgan Chase & Co. is bringing in a new executive to run one of its hottest products, the Sapphire Reserve credit card, at a time when doubts have surfaced within the bank about its financial prospects.

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The nation's largest bank has hired Barclays PLC card executive Matthew Massaua to oversee the popular rewards card and other Sapphire cards, according to a J.P. Morgan memo reviewed by The Wall Street Journal.

Mr. Massaua, who is scheduled to start his new job Jan. 1, will succeed Lisa Walker, who ran the Sapphire card suite and is planning to take on a new role within the bank's card division.

The bank has already made changes in recent months to Sapphire Reserve's rewards and how it has offered the card to customers.

Though consumer demand for Sapphire Reserve was high when the bank introduced the card last year, J.P. Morgan executives have raised concerns that it won't make money for the bank, due in part to the card's generous rewards, The Wall Street Journal reported in July.

The scrutiny inside the bank reflects changing economics of the competitive premium-card market. Rewards for consumers -- paid for by card-issuing banks and merchants -- have gotten sweeter. Spenders, meanwhile, are growing savvier about maximizing benefits and avoiding balances that result in interest payments to the banks. Banks over the past year have started to pull back on rewards offerings as a result.

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J.P. Morgan has said it is making a long-term bet on the millennial customers who favor the card. Much of that has been riding on how many Sapphire Reserve customers will spend $450 on the card's annual renewal fee.

Trish Wexler, a J.P. Morgan spokeswoman, said the bank has seen renewals in excess of 90%. The bank has seen "strong retention, frequent card usage, and we're beginning to deepen these relationships across Chase," she added, noting that Ms. Walker "was a big part" of those results.

Mr. Massaua was previously a top executive at Barclaycard International, which includes the British bank's U.S. credit-card unit and is most well-known for its co-branded cards with JetBlue Airways Corp. and more recently Uber Technologies Inc. Barclays declined to comment.

In recent weeks, J.P. Morgan also promoted its head of Chase branded cards Pamela Codispoti, who helped launch Sapphire Reserve, to run the bank's branch network, Ms. Wexler said.

During the bank's most recent earnings call in October, J.P. Morgan Finance Chief Marianne Lake said that Sapphire Reserve renewals are in the "early stages" but are "so far, very encouraging...better than our expectations, but a little early to sort of draw firm conclusions."

Ms. Lake also said, however, that revenue in the division that includes the card business is expected to be "relatively flat" in the fourth quarter. Credit-card openings fell to 1.9 million in the third quarter, down 30% from 2.7 million in the year-earlier period. Another bank spokeswoman said the decline is due in part to three card launches in mid-to-late 2016.

Banks including J.P. Morgan generate credit-card revenue from the annual fees customers pay, the interest charged on their balances and the fees merchants pay when the card is used at their businesses.

The bank pays out when it offers rewards, such as the 100,000-point sign-up bonus that J.P. Morgan initially offered on Sapphire Reserve. But after about five months, it halved that offer.

Around that time the bank sent an internal notice to branch employees stating it would no longer preapprove customers for the card, according to the late January memo reviewed by The Wall Street Journal.

When bank customers meet with J.P. Morgan personal bankers for matters relating to their deposit accounts, personal bankers often suggest credit-card offers that they can qualify for. According to the memo, though, the bank wouldn't include Sapphire Reserve among the cards it pitches to them.

Still, consumers can apply for the card. And J.P. Morgan isn't shying away from advertising it. In September, it rolled out its first Sapphire Reserve television campaign, with late-night host James Corden highlighting the card's travel and dining rewards.

Write to Emily Glazer at emily.glazer@wsj.com and AnnaMaria Andriotis at annamaria.andriotis@wsj.com

(END) Dow Jones Newswires

December 10, 2017 10:14 ET (15:14 GMT)