Relationship Banking

JPMorgan's relationship with Chinalco goes back several years. It was one of the bookrunners for Chalco's around HK$4.5 billion share placement in May 2006. Chinalco is the parent of Chalco.

With JPMorgan among those defending Rio from the BHP offer, the bank did not take part in Chinalco's 'dawn raid' last year in which it purchased a stake in Rio in a bid to block BHP.

But, two months after that bid fell through, JPMorgan was invited in to advise Chinalco as it sought to capture Rio assets and shares at the bottom of the commodity price cycle, a deal that would have helped Rio pay down its huge debts.

Chinalco was already being advised by Japanese bank Nomura -- a legacy relationship through Lehman Brothers -- Blackstone Group and China's CICC.

The late addition of JPMorgan didn't sit well with the other bankers, sources say, and that discomfort has only grown now that JPMorgan is in a position to earn a hefty fee as a Rio underwriter following the collapse of the Chinalco offer.

This happens in investment banking. Even if executives on both sides agree to a client relationship, competitors will see the potential for a conflict of interest.

The key to navigating these issues is the comfort level of the bank's client, says Jamie Allen, secretary general of the Asian Corporate Governance Association, speaking generally about corporate governance.

"But I guess they would need to make sure their investment bank isn't advising the other side on doing something differently," he said. "Presumably, it would be different teams within the investment bank, but that isn't entirely a cause for comfort."

While some say a financially strong JPMorgan is being opportunistic, others note that Chinese corporate clients are growing more savvy and an adviser's other business interests is far less of an issue there than in the United States or Europe.

"It's a strategic business decision that each bank has to make for itself," said a Hong Kong-based M&A lawyer, referring to JPMorgan's role in the deals.

"Presumably, part of the analysis is how the decision would play with the guy on the other side, who may be a client in another context. In the end, they've got to live with their decision."