US banking crisis is not done, JPMorgan Chase CEO warns investors

New York — The US banking crisis is continuing and will have effects for years to come, JPMorgan Chase CEO Jamie Dimon wrote in a letter to shareholders on Tuesday.

“The crisis is not yet over and even when it is behind us there will be repercussions from it for years to come,” Dimon wrote in a 43-page annual message covering topics ranging from JPMorgan’s performance to geopolitics and regulation.

Storm clouds are still threatening the economy, as they did a year ago, said Dimon.

And the banking system is under renewed stress after the failure of Silicon Valley Bank and Credit Suisse’s rescue by UBS last month.

“The market’s [chances] of a recession have increased,” Dimon wrote.

“And so while this is nothing like 2008, it is not clear when this crisis will end. It has provoked lots of jitters in the market and will clearly cause some tightening of financial conditions as banks and other lenders become more conservative.”

Even so, it is unclear whether the disruptions will slow the consumer spending that drives the US economy, Dimon wrote.

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

But he downplayed similarities to the global financial crisis. While the 2008 crash hit large banks, mortgage lenders and insurers with global interconnections, “this banking crisis involves far fewer financial players and fewer issues that need to be resolved”, Dimon wrote.

After taking the helm of JPMorgan in 2006, Dimon presided over the bank’s crisisera acquisitions of troubled investment bank Bear Stearns and of Washington Mutual, whose failure was the largest in US history.

As the 2023 crisis unfolded, Dimon again played a central role, helping to arrange a $30bn lifeline for First Republic Bank from 11 large lenders.

JPMorgan, Bank of America, Citigroup and Wells Fargo committed $5bn each, and Morgan Stanley and Goldman Sachs $2.5bn apiece.

Any new regulations in response to the latest turmoil should be “thoughtful”, including clearer rules for dealing with failed banks, Dimon wrote.

Dimon also took aim at nonbank financial firms, which have become competitive with banks in providing mortgages, credit cards and market-making.

“Would nonbank credit providing institutions be able to provide credit when their clients need them the most?” he asked. “I personally doubt that many of them could.”