All bad things must come to end has been the hope of the banking industry for these past eight years. Now it seems that time has come. In the past week or so just about everything has been coming up roses for America’s banks. JPMorgan Chase delivered second quarter earnings that “beat the Street”, as Wall Street jargon would have it. Equity trading revenues (+27% year-on-year), investment banking fees (+4%), and core loans (+12%) combined with lower expenses to allow CEO Jamie Dimon to announce, chortle might be more accurate, “We’ve made good progress … including meeting regulatory requirements … adding to our capital … on target to deliver on our expense commitments.” Dimon, not known for his reticence, decided that with income inequality the stated concern of politicians ranging from Socialist/Democrat Bernie Sanders to right-winger Republican Ted Cruz, this is not the time to comment on reports that the recent run-up in JPMorgan Chase shares has catapulted him into the less-exclusive-than-it-once-was billionaire class, according to the Bloomberg Billionaire Index (yes, there is such an index). His $1.1 billion wealth is a snip compared with such as hedge fund entrepreneur George Soros ($28 billion) or Blackstone Group founder Steve Schwartzman ($13 billion), but then Dimon is merely an employee (“wage slave” in the jargon of the left) of his bank, rather than the founder/owner of a successful financial institution.
JPMorgan Chase’s success still leaves it playing second fiddle to Wells Fargo. The market value of the San-Francisco-based bank has leapfrogged that of Industrial & Commercial Bank of China, making it “the Earth’s Most Valuable Bank” according to The Wall Street Journal. Wells’ market value of almost $300 billion puts it $42 billion up on Citigroup and $120 billion ahead of Dimon’s JPMorgan Chase. It has not gone unnoticed by regulators that Wells has the simplest, most straight-forward business model of all large banks. No risky trading with borrowed money, few complex derivatives (one-tenth the value of those held at Citigroup and JPMorgan Chase), just some plain-vanilla mortgage lending and consumer banking. “It feels like a cleaner story,” says David Konrad, head of bank research at Macquarie group. It certainly does. In about the past 18 months Wells has not paid a fine over its residential mortgage-backed security business while Bank of America ($16.65 billion), Citigroup ($7 billion) and JPMorgan Chase ($13 billion) have handed billion-dollar fines over the government, bringing the total for the 20 largest banks to $235 billion in the past seven years, a few billion shy of the current GDP of Greece.
