JPMorgan’s Dimon says the US banking crisis is not over, sees long-term consequences

NEW YORK, April 4 (Reuters) – The U.S. banking crisis is ongoing and its impact will be felt for years, JPMorgan Chase & Co ( JPM.N ) Chief Executive Officer Jamie Dimon wrote in a letter to shareholders on Tuesday.

“The current crisis is not yet over, and even when it is behind us, it will have consequences for years to come,”[ads1]; Dimon wrote in a 43-page annual message covering a range of topics from JPMorgan’s performance to geopolitics and regulation .

Storm clouds still threaten the economy as they did a year ago, said Dimon, chief executive of the largest US lender. And the banking system is under renewed stress after the failure of Silicon Valley Bank and Credit Suisse’s rescue of UBS last month.

“The market’s odds of a recession have increased,” Dimon wrote. “And while this is not like 2008, it is not clear when this current crisis will end. It has provoked a lot of turmoil in the market and will clearly lead to some tightening of financial conditions as banks and other lenders become more conservative.”

Still, it’s unclear whether the disruptions will slow the consumer spending that drives the U.S. economy, Dimon wrote.

Risks that led to the current crisis are “hiding in plain sight,” Dimon wrote, citing interest rate exposure and the level of uninsured deposits at Silicon Valley Bank.

But he downplayed similarities with the global financial crisis. While the 2008 crash hit big banks, mortgage lenders and insurance companies with global interconnections, “this current banking crisis involves far fewer financial players and fewer problems to solve,” Dimon said.

After taking the helm at JPMorgan in 2006, Dimon led the bank’s crisis-era acquisitions of troubled investment bank Bear Stearns and Washington Mutual, the savings and loan whose failure was the largest in US history.

Jamie Dimon, chairman and chief executive of JPMorgan Chase & Co., gestures as he speaks during an interview with Reuters in Miami, Florida, U.S., February 8, 2023. REUTERS/Marco Bello/File Photo

As the current crisis unfolded, Dimon again played a central role, helping arrange a $30 billion lifeline for First Republic Bank ( FRC.N ) from 11 major lenders.

JPMorgan, Bank of America Corp ( BAC.N ), Citigroup ( CN ) and Wells Fargo & Co ( WFC.N ) committed $5 billion each, followed by Morgan Stanley ( MS.N ) and Goldman Sachs ( GS.N ), with 2.5 billion dollars each.

Any new regulations in response to the latest turmoil should be “thought out,” including clearer rules for dealing with failed banks, Dimon wrote. “Irregular stress test capital requirements and constant uncertainty about future regulations harm the banking system without making it safer.”

JPMorgan’s shares have fallen nearly 3% this year since the stock’s previous close, versus a 13% decline in the S&P index (.SPXBK) for broader bank stocks.

Shares in the bank fell 2% to $127.55 just after midday.

The company, along with fellow lending giants Bank of America and Citigroup, was flooded with deposits after the collapse of Silicon Valley Bank in March, sources familiar with the situation said at the time.

Dimon also took aim at non-bank financial firms, which have become increasingly competitive with banks in offering mortgages, credit cards and market-making services.

“Would non-bank lending institutions be able to provide credit when their clients need it most?” he asked. “I personally doubt many of them could.”

Reporting by Tatiana Bautzer; Editing by Lananh Nguyen, Leslie Adler, Chizu Nomiyama and Richard Chang

Our standards: Thomson Reuters Trust Principles.

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