Returns this high were no longer supposed to be possible. After the 2008 crisis, banks were forced to hold more equity, increasing their cushion against losses and depressing returns.
As a result, many banks' returns on equity languish in the single digits, below their cost of capital. Shareholders have responded by withdrawing their funds. For most of the industry, the last decade has been a miserable quest for a viable business model. Zombie banks prowl the earth.
Banks in Europe are in an especially abject state. JPMorgan's market capitalisation of US$430b is higher than the combined value of Barclays, Société Générale, Standard Chartered, UniCredit, Credit Suisse, UBS, BBVA, Royal Bank of Scotland, Crédit Agricole, ING and Lloyds.
JPMorgan's surging share price has seen the bank enter the top-10 most valuable companies in the world, vying with global tech giants — ahead of Intel and Samsung, and closing in on China's Tencent.
The comparative strength of the US economy is helpful, but it cannot be the only explanation. After all, Dimon is also embarrassing Wall Street rival Goldman Sachs, whose once stellar profits have dimmed and whose new gambits, such as consumer banking, are yet to pay off.
You can point to JPMorgan's boost from consolidation. Dimon swooped on Bear Stearns and Washington Mutual in 2008. But he was only in a position to strike those deals because he had protected his own balance sheet. And if crisis-era acquisitions were all that mattered then Barclays, which picked up the core of Lehman Brothers, and Bank of America, which bought Merrill Lynch and Countrywide, would be worldbeaters too.
For his envious rivals around the world, there are no perfect excuses. JPMorgan's triumph gives the lie to the idea that it is impossible to make serious profits under tougher industry rules.
But that also creates a problem for Dimon himself. For years he has railed against regulations, warning of dire consequences and complaining that European banks have unfair advantages from "anti-American" rules. That argument looks increasingly futile.
His broader complaint against the capital surcharges imposed on the biggest banks — "my biggest issue," he said in the regulatory section of his last shareholder letter — is also undermined.
Even before the latest stellar quarter, Dimon seemed to recognise he was on precarious ground: "Outperformance is not ordained from above and may not always be the case," he wrote last year. True enough, but until JPMorgan's star fades, his pleas for leniency will fall on deaf ears.
Written by: Tom Braithwaite
© Financial Times
