Good banks do not collapse in times of turmoil. But the best banks do more than that – they are so buttressed against stress that when it strikes, they not only emerge unscathed but can act decisively in support of the whole sector. JPMorgan was that bank in March 2023, able to play that role because of its consistently superior performance.
JPMorgan and its chief executive Jamie Dimon are among the select few to have transcended their industry. The bank’s views and actions command attention the world over, and not just in matters that relate to finance. Like a celebrity superstar, Dimon is often referenced by just his first name. His is the opinion that is sought out at critical times.
And the country hit just one of those in March 2023, as poor risk management came home to roost among some of the weakest regional bank franchises in the US. When Silicon Valley Bank (SVB) collapsed after losing depositor and investor confidence when it unveiled losses in its long-dated securities portfolio on the back of rising interest rates, it sent the sector into turmoil.
The contagion quickly hit First Republic Bank, prompting 11 banks led by JPMorgan to inject $30 billion of deposits into the institution to stabilize it. When the situation had worsened some weeks later, it was JPMorgan that came to the rescue, buying the bank on May 1.
That acquisition came after the end of Euromoney’s awards period, but JPMorgan’s role in the whole episode was emblematic of what the bank can do by virtue of its extraordinary strength and stability.
For the country’s biggest bank, the move was merely another remarkable achievement in a mostly exemplary period for the firm since the global financial crisis. JPMorgan bills itself as an institution that is complete, global, diversified and operating at scale, and so it is.
Only a bank that was all those things would be able to mobilize 800 of its staff over a weekend to win the bid for First Republic; or be able to pluck employees from across the firm to help process the vast demand in asset and wealth management since the SVB collapse on March 10, with tens of thousands of accounts opened since then.
As another US bank chief executive tells Euromoney, with perhaps a touch of jealousy: “If they want to win, they’re going to win.”
As JPMorgan’s chief operating officer, Daniel Pinto, put it at the firm’s investor day in May 2023: “I think that this was JPMorgan Chase at its best.”
At that investor day, Pinto – who is also chief executive of the firm’s investment bank – listed just some of the qualities that make the bank stand out. Its consumer bank has the number-one deposit franchise in the US, with market share up about 400 basis points in 10 years. It is the top US credit card issuer. Assets under management in the US wealth business have quadrupled in 10 years and are growing fast.
The power of our investments, our diversification and the scale of the business we run will drive the future success of the company
Daniel Pinto
The commercial bank, meanwhile, is the top multifamily lender in the US. In the corporate and investment bank, its four core franchises of investment banking, markets, payments and securities services are all gaining market share.
“We have a 9% compound annual growth rate in tangible book value per share since 2004,” said Pinto. “That is 400 basis points ahead of most of our peers… The power of our investments, our diversification and the scale of the business we run will drive the future success of the company.”
Those investments include a huge amount of technology – the bank has 57,000 staff dedicated just to that. In 2022, it spent $14.3 billion on it, and in 2023 it will spend another $15 billion on top of that. But that spend has stayed roughly in line with the bank’s target to spend 10% of revenue – and efficiency is increasing all the time. The bank has already delivered $500 million of efficiencies after having set an objective last year of $1.5 billion over three years.
This year new product features get delivered 20% faster than last year. By the end of 2023 the bank plans to realize $1 billion in value through investments in artificial intelligence (AI) – it has more than 300 AI projects in production.
That the bank can commit the time and expense that it does to technology is because of the rigour applied to the basics of banking, in excellent risk management and a conservative approach to extending credit.
And its soundness gives it power in other ways too, an ability to make opportunities out of crises and to continually push itself. Dimon likes to tell the story of how JPMorgan analyzed SVB after it failed and dug down into the bank’s relationships with its venture capital clients and with the companies that they invested in, about 35,000 all told.
What amazed Dimon was how well SVB had built that coverage effort, when JPMorgan itself had always complained about its inability to get involved in venture capital.
“And so, we did the work,” he told the audience at the investor day. “You know what my first response was? ‘Why didn’t we do this work before?’ We didn’t realize how deeply embedded they were in the system.”
