JPMorgan's $4 Trillion Balance Sheet Widens Lead Over Rivals | Firm has added the equivalent of one Wells Fargo since financial crisis
Even Dimon’s competitors have acknowledged his success. Morgan Stanley Chief Executive Officer James Gorman recently praised him on television as the best bank executive in the world. Raymond, who left JPMorgan’s board in 2020, compared him to John D. Rockefeller, the Standard Oil baron.
“There is nobody in the banking business that I’ve seen that compares,” Raymond said. “It’s really hard to see where anybody has done what JPMorgan has been able to do.”
Peers Stumble
The idea that some banks are too big to fail was popularized during the 2008 crisis, when officials emphasized the necessity of bailing out lenders whose collapse would have tanked the global financial system. The phrase had the ring of a slur then, but enormity has turned into a marker of stability, attracting clients in times of uncertainty.
“I actually don’t know what ‘too big to fail’ means anymore,” said Sandy Pierce, who’s retiring from Huntington Bancshares Inc. after 45 years in the industry, including almost three decades at JPMorgan. “There is a difference, obviously, between what is going on for the big big banks and the regional banks.”
JPMorgan has emerged as the biggest of the big. Its next-largest competitors have also added waves of clients, but those rivals have been in less of a position to play offense. Bank of America Corp. is contending with a mountain of unrealized losses on low-interest assets that may drag on earnings for years, while Citigroup Inc. and Wells Fargo & Co. are shoring up internal controls to address regulators’ concerns.
Smaller lenders rely even more on net interest income and have seen theirs fall in 2023. The year also put an exclamation point on other challenges their executives had been flagging, such as the rising cost of keeping up with technological advancements. JPMorgan’s annual tech budget now exceeds the revenue generated by all but the largest regional banks. This year, the firm raised its forecast for how much it will benefit from its embrace of artificial intelligence.
Meanwhile, the surprising fragility of some small and midsize lenders has prompted regulators to take a closer look at the entire sector, potentially raising their costs further.
That will make it all the harder for smaller lenders to narrow the gap with industry giants, said Keith Noreika, who was acting comptroller of the currency in 2017.
“The very largest banks came out winners, again,” he said. “Size and scale in banking matter, and the regulatory and policy responses to the challenges we saw in the first half of the year dug an ever-deeper moat around the biggest banks.”
Index Colossus
That doesn’t mean size guarantees success. Citigroup was the biggest bank in the US until the financial crisis, when it ended up leaning harder on taxpayer support than any of its competitors. And Wells Fargo was the most valuable bank in the US until 2016, when a spree of scandals put it in regulators’ crosshairs.
Some of JPMorgan’s admirers suggest it wins simply because it’s enormous and stays out of trouble. One problem with the theory is that the bank’s record isn’t spotless.
Just this month, JPMorgan lost a European Union court appeal of a €337.2 million ($372 million) fine for rigging the Euribor benchmark. Last month, a judge approved JPMorgan’s $290 million settlement with Jeffrey Epstein’s victims. That was one of two agreements the firm reached this year to resolve claims it ignored red flags while continuing to provide financial services to the notorious sex offender long after his initial conviction.
Such problems typically have little, if any, impact on the stock.
As Dimon, 67, extends his tenure atop JPMorgan indefinitely, his firm is worth more than its two next-largest competitors put together. Its market value amounts to about 27% of the KBW Bank Index’s total value. When he took the reins, that figure was 12%.
“He’s made it bigger and bigger,” Raymond said. “Economy of scale is important in this industry, and that’s really the point.”
Doesn’t everyone want to be big?
“Sure, they probably do,” Raymond said. “But that doesn’t mean they can accomplish it.”
This article was provided by Bloomberg News.