JPMorgan keeps getting bigger

JPMorgan got bigger. We knew that. But how much bigger? Net interest income is a closely watched number on Wall Street, showing how much money is being made on lending. JPMorgan Chase & Co.’s $90 billion total for 2023 is roughly $30 billion more than its closest competitor, Bank of America Corp .—and even more than that for Wells Fargo & Co .

JPMorgan’s most stunning statistic is its profitability . Let’s consider the return on tangible common equity, another closely watched metric. For the full year, JPMorgan’s was a whopping 21% for 2023. Its closest rivals among the big banks, Bank of America and Morgan Stanley, have either come in at or are expected to be about 13%.

Helped by the acquisition of First Republic Bank, JPMorgan Chief Executive Officer Jamie Dimon is trying to raise the bar even higher in 2024, and he’s spending more to do so. The number of employees at JPMorgan surpassed 300,000 in the past year—and the bank may keep growing while many others are shrinking.

Citigroup confirmed its plan to cut tens of thousands of jobs this year. Staffing stood at about 240,000 at the end of last year, but the bank told investors on Friday that its headcount will be 180,000 over the medium term (which I understand to be around 2026). That would drop the second-largest employer on Wall Street below Bank of America and Wells Fargo, another remarkable turn of events.

Usually, reading through the big bank presentations when the quarter ends is fairly boring. But as the economy changes, so does strategy for the biggest banks, investors and corporations. Every employee should be reading the tea leaves this earnings season on where CEOs are allocating dollars—especially because, in the most recent quarter, most of these banks (even JPMorgan!) have spent more than Wall Street analysts expected.

Dimon still had a large note of caution in his initial remarks to investors, saying there are “unprecedented forces” that could upset what’s an otherwise resilient economic landscape. Here are his most recent risks:

The economy is being fueled by large amounts of government deficit spending and past stimulus. There is also an ongoing need for increased spending due to the green economy, the restructuring of global supply chains, higher military spending and rising health-care costs. This may lead inflation to be stickier and rates to be higher than markets expect.

Over at BlackRock Inc., which also reported full year results this morning, assets have risen past $10 trillion once again, though that’s still a little lower than the 2021 peak. Job cuts are pending, too. But there’s a new path ahead: The giant asset manager agreed to buy private investment giant Global Infrastructure Partners for about $12.5 billion, adding $100 billion in assets and pushing the firm known for exchange-traded funds and passive investing into more alternative investments. Expect rivals to make similar deals throughout the year.

The Next Big Risk

A finance executive’s job is to assess the unknown. So twice a year, we go to titans of industry and ask them to look 10 years out and shine a light on what others are missing. Ray McGuire, the president of Lazard, believes one big concern is the American Dream. He says the failure to invest in education is eroding the country’s competitive dynamics:

We’re creating a permanent underclass. It used to be that education afforded us the opportunity to realize the American Dream. Today it’s so stratified that a significant percentage of our population will never realize it. … Illiteracy today reflects the abject failure of leaders in the educational world. The crisis is today. And so we need to be urgent.

Katie Koch, the CEO of TCW, sees longevity risk. People are living longer, because of exciting technologies, but paying for those extra retirement years without a pension will be difficult. What’s more, she thinks the universe of existing investments for savers isn’t adequate:

At the very moment when that burden has transferred to individuals, we’ve seen and will continue to see a migration of some of the most attractive income-producing assets from public to private markets. So there are quite a number of challenges. … If we look at the US public equity market, there are 50% less listed companies now than there were 20 years ago. And I think we are at the very early stages of fixed income being disrupted. We’ve seen that in the rise of private credit.

Billionaire Wes Edens thinks investors aren’t pricing in the risks of more geopolitical tumult. He tells me: “The risk of higher interest rates is one that people don’t think about as much as they should. Geopolitical risk can actually add to that.”

You can find the full story here , plus the half-hour show for Bloomberg Television, where you can hear for yourself from each of these industry leaders . Next year, the project will be in its fifth year, so we’ll start to go back to see how all of these risks have panned out.

More to come. It's a huge week ahead, even if it's a short week. Start with us first thing in the morning on Tuesday for Blomberg Television, we'll break down the full year results for Goldman Sachs, Morgan Stanley and a host of regional banks as they recover from last year's jitters. And as we end this week, don't forget to join me for Real Yield on BTV every Friday -- the bond market is super volatile and a true mystery to cover.