If there was ever a time that demonstrated JPMorgan’s credentials as the country’s best bank, it was the crisis in March and April 2023 when US regional banks suddenly faced a balance sheet reckoning triggered by the rapid change in interest rates.
That it was JPMorgan that authorities turned to at the end of April for the lowest-cost solution to a struggling First Republic Bank was no surprise.
JPMorgan chief executive Jamie Dimon takes a pragmatic view of these kinds of situations, seeing it as often worth bidding for failing banks to avoid having to contribute to a higher-cost alternative when the next Federal Deposit Insurance Corporation (FDIC) assessment is levied to top up the industry’s rescue funds.
And so, on the last weekend of April, JPMorgan found itself poring over First Republic’s financials and preparing to assume its obligations on the Monday morning. The integration of that bank’s clients is a job that is still progressing, often because the new arrivals not only want their First Republic accounts transferred but also now want to use JPMorgan as their primary bank.
The First Republic acquisition followed the earlier collapse of Silicon Valley Bank (SVB), on the night of Thursday March 9, one day after the closure of the smaller Silvergate Bank. JPMorgan had been asked to look at the possibility of acquiring SVB but in the end did not do so and, instead, SVB was taken into FDIC control on the Friday morning. Two days later, Signature Bank also failed.
That did not end JPMorgan’s involvement, however. The flight of SVB customers to the strongest alternative institutions meant that JPMorgan saw several years’ worth of new clients try to sign up for accounts in one weekend.
There are few firms that can pivot as quickly as JPMorgan to deploy the hundreds of staff needed with no notice to cope with such a situation. Bankers at the firm say they had never managed a scenario like it before, with the roll-out of government support programmes at the start of the Covid-19 pandemic the closest comparison.
The bank ended 2023 in phenomenal shape. Too good in some ways, to judge by comments from Dimon, who took the opportunity of the bank’s earnings announcement to excoriate regulators once again for imposing far too onerous requirements in the final application of Basel III rules to US banks.
There are few firms that can pivot as quickly as JPMorgan to deploy the hundreds of staff needed with no notice to cope with such a situation
“Our balance sheet remained extremely strong, with a CET1 [common equity tier-1] ratio of 15%, a staggering $514 billion of total loss-absorbing capacity and $1.4 trillion in cash and marketable securities,” he said.
Dimon had plenty of more highlights to note: the two million net new cheque accounts that the bank’s consumer and community banking division added over the year; the fact that its corporate and investment bank retained its number one ranking; a doubling of new client additions in the commercial bank, with 5,000 added; and record client inflows in asset and wealth management of nearly half a trillion dollars, more than 20% above the firm’s previous record.
The bank posted revenues of $158 billion in 2023, up 23% from the previous year, with Dimon readily conceding that this reflected “over-earning” in net interest income and credit.
Expenses rose by 14%, meaning that pre-provision profit soared 46% to $9.3 billion.
One senior banker at the firm describes its performance as “non-flashy constancy”. In a year like 2023, it is hard to imagine anything more appropriate.
