"Goliath's Victory"... Bank Crisis Reveals Limits of Too-Big-To-Fail Banks

JP Morgan Raises Profit Forecast Again at Investor Day Event

Amid the ongoing fallout from the U.S. regional bank crisis, the country's largest investment bank, JP Morgan Chase, has reportedly expanded its size and increased its profits through the resulting benefits. This highlights the limitations of the "too big to fail" phenomenon, which only deepens the 'rich get richer, poor get poorer' situation within the industry.

On the 22nd (local time), JP Morgan raised its net interest income forecast from the previous $81 billion (approximately 107 trillion won) to $84 billion during its Investor Day event, stating that the acquisition of First Republic would bring greater profits. The previous forecast of $81 billion had already been raised by $7 billion from an earlier estimate.

Analysts suggest that JP Morgan and other large banks have benefited doubly from the Federal Reserve's aggressive interest rate hikes and the bank run (massive deposit withdrawals) that hit regional banks. Wells Fargo analysts described JP Morgan's Investor Day announcement as "Goliath has triumphed."

CNBC, a U.S. financial media outlet, analyzed that JP Morgan became one of the few banks to see an increase in customer deposits as regional bank customers, feeling uneasy since the regional bank crisis intensified in March this year, moved their deposits.

[Image source=Reuters Yonhap News]

On the 1st, JP Morgan made a surprise acquisition of First Republic, which was in crisis. With 4,800 branches nationwide, JP Morgan added 93 branches through the First Republic acquisition. JP Morgan also expanded its size by acquiring Bear Stearns and Washington Mutual during the 2008 global financial crisis.

Jamie Dimon, CEO of JP Morgan, explained the integration process after acquiring First Republic, stating, "First Republic will help us further improve our wealth."

JP Morgan currently holds 13% of total U.S. deposits and over 21% of American credit card spending, which the Wall Street Journal (WSJ) analyzed as the largest scale among single banks in the U.S.

JP Morgan's strength also revealed the limitations of the U.S. financial system. Large banks like JP Morgan have grown bigger as a reflection of the collapse of regional banks, and their influence has become more extensive. This oversized growth is criticized for creating a vicious cycle where, in times of crisis, the government prioritizes "too big to fail" bailouts over market rules, concentrating loans only to large banks and ultimately causing greater sacrifices for small and medium-sized banks.

Gene Ludwig, former head of the Office of the Comptroller of the Currency (OCC), the U.S. banking system regulator, emphasized, "Small banks need to maintain their ecosystem for diversification, as they provide services to industries and regions that mega banks do not support."

Meanwhile, at the event, Jamie Dimon, Wall Street's longest-serving CEO, was asked how much longer he would remain CEO. He laughed and replied, "Three and a half years," adding that he had given the same answer before.

This content was produced with the assistance of AI translation services.