Dimon’s success creates headaches for JPMorgan

“THE size, scale and scope of JPMorgan Chase also offer huge advantages,” Jamie Dimon wrote in a letter to shareholders — his first as chief executive officer at the end of 2005. Two decades later, the claim seems almost quaint. The bank’s balance sheet is now four times larger; its stock market capitalisation has ballooned by more than five times; and profit this year is forecast to be nearly seven times higher than then.

JPMorgan Chase has left the competition behind, even its biggest and most consistent peers, including Bank of America, Goldman Sachs and Morgan Stanley. At more than US$800 billion, the bank is now worth as much as these three combined.

Can it keep winning? And is it too big? These are related questions. To find growth that doesn’t make the bank more of a risk to itself and the economy it inhabits, it has to be very well run. But its immediate problem is an extremely high stock valuation and billions of dollars of excess capital – both of which threaten its returns if mishandled. Size alone “is not enough to win”, Dimon wrote two decades ago. “In fact, if not properly managed, it can bring many negatives.”