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JPMorgan Chase captured almost a fifth of all US bank profits in the first nine months of 2023, capitalising on a year of turmoil for the country’s financial sector to emerge even more dominant.
Its US banking subsidiary earned $38.9bn in profits — about 18 per cent of the industry’s total — according to FT calculations based on figures from industry tracker BankRegData.
If the pattern continues for the full year, the lender will not have commanded such a high share of industry profits since 2009, when many banks were still recovering from the financial crisis. Its earnings for the period exceeded those of Big Four rivals Bank of America and Citigroup combined.
“JPMorgan is the Goliath of Goliaths,” said Wells Fargo analyst Mike Mayo. JPMorgan declined to comment.
The data is not comprehensive. It covers profits from subsidiaries with Federal Deposit Insurance Corporation-insured deposits, and includes JPMorgan’s earnings from commercial and retail banking, and parts of its investment banking and trading division, which not all the bank’s rivals do.
However, the figures show how chief executive Jamie Dimon has taken advantage of acquisition opportunities — not least with the rescue of First Republic this May — and of errors by rivals to establish JPMorgan as the largest US bank by almost every measure.
Most big banks have benefited from rising interest rates, which allow them to juice margins by imposing higher rates on borrowers more quickly than they pass them on to depositors.
But JPMorgan stole a march on rivals with its purchase of First Republic after the collapse of the California-based lender, hearkening back to the period when the bank scooped up firms such as Bear Stearns and Washington Mutual during the 2008 financial crisis.
“JPMorgan Chase has been very effective at being in the right place at the right time when distressed sales were available,” said Eric Rosengren, former president of the Boston Fed.
The gains from the First Republic deal were immediate. In the second quarter of 2023, when the deal closed, JPMorgan earned almost 20 cents out of every $1 in profit reported by US banks, according to BankRegData, up from 12 cents a year earlier.
JPMorgan’s peers have meanwhile made their share of mis-steps.
BofA is nursing more than $100bn of paper losses on bonds purchased in the lead up to the Federal Reserve raising rates. Wells Fargo has had an asset cap since 2018 as punishment for opening millions of false accounts, which has curtailed profitability. Citi is undergoing a painful reorganisation after years of subpar performance and is under a consent order from the Fed, requiring it to spend on processes and technology.
“The more impressive part of JPMorgan is how, given the size that they are, they still also at the same time managed to put out the highest return on equity among the peer group,” said Ken Usdin, head of banking research at Jefferies.
When Dimon became CEO, JPMorgan held around 8 per cent of US bank deposits, lagging BofA and just barely ahead of Citi. Now it has $2.5tn of deposits: more than 13 per cent of the industry total and ahead of BofA, whose share of deposits has only marginally increased in that time.
Marianne Lake, JPMorgan’s co-head of consumer banking, told a December industry conference that the bank was bullish about continuing to grow its share of deposits, by continuing to open new branches, investing in technology and hiring more bankers.
“It’s the product of the 10 years of investments we’ve made and the 10 years we’re about to make that’s going to continue to see that kind of growth going forward,” Lake said.
JPMorgan this year spent almost $16bn on new initiatives and technology in what it described as an “unmatched” spending effort.
JPMorgan has been able to lend out or invest these deposits to earn a profit, reaping massive gains as the Fed lifted interest rates.
Its enormous size makes it one of a handful of US banks that savers see as having an implicit government guarantee on its deposits, believing that regulators would not allow the bank to fail in a crisis due to its systemic importance to the global economy.
That has made its deposits stickier than at some other institutions.
Smaller banks have come under pressure from depositors, either from savers concerned that funds above the $250,000 limit covered by government-backed insurance or from depositors looking for better rates.
In US banks overall, the proportion of deposits on which banks pay some sort of interest has risen to around 70 per cent from 65 per cent a year earlier; JPMorgan only pays interest on around 55 per cent of its deposits, unchanged from a year ago.
When Dimon became chief executive of JPMorgan in 2006, the US had more than 7,600 banks. Only around 4,300 remain, according to BankRegData. The vast majority are local minnows with fewer than $10bn in assets.
In 2021, JPMorgan leapfrogged Wells Fargo as the bank with more branches than any other in the US. That was the same year that it met its target of having a Chase branch in all of the 48 continental US states.
While the overall number of bank branches has been steadily falling in the US, JPMorgan still sees brick-and-mortar outposts as a key path to grow.
The bank has said that the Chase branches opened since 2017 had so far contributed around $85bn in deposits.
Dimon appears to be going nowhere. He has signalled that he plans to stay on as chief executive for several more years.
His eventual successor will potentially have to grapple with higher capital requirements that Dimon has argued will constrain bank lending in the economy.
Lake and Jennifer Piepszak, co-heads of the consumer business, have been mooted as the leading internal candidates to eventually replace him.
“This place is too big,” said one former JPMorgan executive. “Jamie is such a force of nature that it papers over the cracks today, but what happens when he’s not there?”
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