62 BriefingJPMorgan Chase The EconomistMarch 14th 2020
21become a world-beater on a wide range of
metrics. In 2006 its investment bank won a
fat share of the advisory fees on Wall Street
but its trading business was comfortably
outclassed by rivals. Today it is number one
in both businesses.
Its retail bank has ballooned in size. In
2006 jpmheld 3.6% of American retail de-
posits; it now holds 9%. The bank opened
almost a quarter of all new checking (cur-
rent) accounts in America last year. It has
also scooped up a growing share of cor-
porate deposits. jpm’s asset-management
business runs $2.7trn-worth of invest-
ments on behalf of clients, double the
amount held in 2006. Acquisitions made
opportunistically during the financial cri-
sis of 2007-09, such as Bear Stearns, an in-
vestment bank, and Washington Mutual
(WaMu), a savings-and-loan institution,
have helped jpmleapfrog other American
and European banks in size (though a
clutch of Chinese banks are still larger).
Importantly, this growth has been re-
flected in the bottom line. Earnings per
share of $9 in 2019 were four times higher
than in 2005. The bank’s roein 2019 was
15%, several percentage points higher than
those of American and Chinese rivals and
double that of the best-performing Euro-
pean ones. This has been achieved without
relying on easy ways of boosting perfor-
mance, like increasing leverage or the risk
the bank takes (see chart 2).
Financial markets have acknowledged
the feat. jpm’s market value is 50% higher
than that of its closest American rival, Bank
of America, which has a balance-sheet al-
most as big, and more than double that of
Citigroup. It beats overseas competitors
too. It is, for instance, six times more valu-
able than Banco Santander, the biggest
euro-zone bank by market value. Over the
past 15 years The Economist has described an
array of global banks—Citigroup, Bank of
America, hsbc, Deutsche Bank—that we
thought could become serious rivals to
jpm. It has left them all in the dust.
What are the ingredients of Mr Dimon’s
success? The best bosses are both lucky andsmart, and he is no exception. European
banks, which stormed into America in the
1990s, have fallen by the wayside in part
owing to problems in sclerotic domestic
markets where rock-bottom interest rates
have crimped margins. The same is true of
Japanese banks. The burgeoning Chinese
lenders are kept at arm’s length by interna-
tional investors, who are rightly wary of
what they stuff into their loan books.Going with the flow
In some key businesses Mr Dimon has deft-
ly taken advantage of the evolution of the
financial system since the crisis. Take
fixed-income trading. Before the melt-
down, the most successful investment
banks focused on complex derivatives
transactions. These are much less profit-
able now, thanks to a thicket of post-crisis
regulation, so the largest players are those
that excel at “boring” flow trades (buying
and selling financial instruments with cli-
ents’ funds rather than their own). This is
just one market in which Mr Dimon’s bank
has gobbled up market share.
But he also deserves credit for strategic
thinking, which some once doubted he
possessed. When he took the helm, he was
already one of America’s highest-profile
bank executives: precocious, telegenic and
charismatic. As such, he had long attracted
media attention. Some fretted about his
temperament. His shouting matches with
Mr Weill were infamous, and he was also
considered brash. Mr Dimon’s wife once re-
portedly asked him why he couldn’t be as
“patient” and “mature” as Bill Harrison, his
predecessor at jpm.
He also had a reputation as little more
than a number-cruncher and cost-cutter.
The value he had created at Bank One was
mostly generated by frugality, not revenue
growth. Doubts lingered about his ability
to pull off a similar trick on a bigger stage.
Yet in his 2005 letter to shareholders,
his first as the boss of jpm, he sketched out
a vision for the firm that he has stuck with
through thick and thin. It registered notonly his loathing of bureaucracy and bloat,
but also his fondness for a “fortress bal-
ance-sheet”. He wrote of the natural con-
nections between different parts of a large
bank—between the commercial and in-
vestment banks, the credit-card business
and the retail bank, and the cash-manage-
ment and asset-management arms. In
summary, Mr Dimon declared that “size,
scale and staying power matter”.
This vision has been vindicated. First,
during the pre-crisis years, he focused on
ridding the bank of flab. This came natural-
ly to him, given his experience wielding
the scalpel with Mr Weill, and tidying up an
ill-executed, pre-Dimon merger between
Bank One and First usa. He then set about
allocating costs properly, in order to cut
them more effectively. Mr Dimon was per-
turbed, for example, that managers at
Chase branches claimed they were more
profitable than their Bank One counter-
parts when the firm did not allocate all
their firmwide costs—like marketing, risk
and legal—to each branch individually, as
they did at Bank One. Once accounted for
on a like-for-like basis, the Bank One
branches made more money. He jettisoned
consultants the firm had hired and
trimmed benefits for executives. He de-
clared the merger complete in January
2006, androeduly climbed to 13%, nar-
rowing the gap with rivals.
But it was the financial crisis that was
the making of him. It quickly became clear
than jpmwas better prepared to weather
the storm than most. This was in part
thanks to his insistence on a solid balance-
sheet, but also because of his management
style. As one bank analyst puts it, “Jamie is
always looking from the perspective of
what can go wrong.”
Such healthy paranoia forms the basis
for a weekly meeting between Mr Dimon
and the heads of all the main businesses.
The meeting has no time limit—some-
times it takes minutes, other times all
day—and he quizzes them on what the
risks are in their units. It was over the
course of these meetings in 2006 that pro-Sitting pretty over Citi
Market capitalisation, $bnSource: Bloomberg *To March 10th35004003002001000
20*181614121008062004Wells FargoBank of AmericaCitigroupJPMorgan ChaseNot betting the house
US banks, March 10th 2020Source: Bloomberg *Risk-weighted assets as a multiple of equity22015105109876543
Financial leverage*Return on equity, %Bank of
America
CitigroupJPMorgan
ChaseWells FargoGoldman SachsMorgan
StanleyCircle size=
Market capitalisationGreater risk →↑ Better returnsFrom laggard to leader
Return on common equity, %Source: Bloomberg1HSBCUBSGoldman SachsCitigroupWells FargoBank of AmericaMorgan StanleyJPMorgan Chase4030201002005 2019