"I shall return." So said American General Douglas MacArthur after his forces in the Philippines were rudely ejected by the Japanese Army in 1942. And he kept to his word, retaking the islands two years later, faster than anyone expected at the time, given the soundness of the thrashing.

JPMorgan Chase (NYSE: JPM) CEO Jamie Dimon may have angrily grumbled the same thing to himself this spring, after sustaining a $5.8 billion loss in the London Whale trading debacle. But whether he said that, or some other comparable, obscenity-laced comment, there's no doubt JPMorgan is back in action in Europe. And that's a good thing.

We shall fight them on the beaches, and in the parking lots
The Financial Times is reporting that the superbank has bought up $728 million of notes in a just-issued commercial mortgage-backed security, the first of its kind since the financial crash. It's backed by the rental income of 30,000 residential properties in Germany, and will pay a yield of just under 4%.

The $728 million amounts to a full three-quarters of the entire CMBS; the rest were bought up by long-term investment funds. The debt is secured by a portfolio of German apartments, houses, and parking spaces.

In and of itself, the almost-4% yield is a wild and beautiful thing in today's dividend-tame bond markets. More importantly, however, is that this is exactly the kind of investment the bank's recently reorganized Chief Investment Office (responsible for the botched London Whale trade) should be doing. Because the German residential property market has such low vacancy rates and such stable rents, it's seen as very low risk, at least compared to $100 billion bets in the derivatives market (see: the already discussed London Whale).

Making money the old-fashioned way, at least to some degree
There's a trend at work in banking worldwide. More regulation and a depressed economy have forced all the big banks to look for safer, less-volatile means of making money:

  • Goldman Sachs (NYSE: GS) recently opened a private bank-within-a-bank to cater to its wealthy clients around the world. "We're a bank," CEO Lloyd Blankfein told The Wall Street Journal in July. "It's not a hypothetical. [We] backed into a big opportunity. We have the regulations. We have the costs. We have the burdens. It is a no-brainer that we'll build our banking business." And so they have. Goldman's commercial banking unit, where its private bank resides, currently has loans worth $13.8 billion on the books.
  • Morgan Stanley (NYSE: MS) recently bought out Citigroup's (NYSE: C) remaining share of Morgan Stanley Smith Barney, with plans to turn it into a premier wealth management service: Morgan Stanley Wealth Management. It's a reasonable strategy. For all the recession, high unemployment, and anemic growth around the planet, there's still no shortage of wealthy people that need expert assistance handling their money.
  • And both Citi and Bank of America (NYSE: BAC) are doing their best to slim down and get back to basics, to focus on the kinds of traditional services that banks used to be known for, even the big ones: hence Citi's sale of MSSB to Morgan Stanley, to focus more on its core competencies, as well as B of A's latest round of job cuts, to try to do more with less.

German renters trump derivatives
Post London Whale, you might have thought JPMorgan would have spent the summer and fall hiding under a rock, licking its wounds.

But just over half a year past an incident that had Dimon explaining his bank's actions before Congress, JPMorgan seems to be solidly past the misstep and doing exactly what it said it would do: doubling down on its risk management and using the CIO for what it was designed for -- taking excess customer deposits and investing them as a general portfolio hedge, not in massive derivative speculation.

So just like MacArthur (minus the pipe and threatened invasion of China), Dimon has stuck to his word. And by returning to Europe, JPMorgan will -- this time around -- be all the better for it.

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