JPMorganChase on acquisitions: Maybe, but probably not

Bloomberg

As JPMorganChase deploys the capital cushion it's built up in recent years, it isn't ruling out acquisitions. But it isn't seeking them out either.

The $4.6 trillion-asset bank is ready to shed some of its excess capital as regulators have become keener to roll back certain post-financial crisis requirements. However, Chairman and CEO Jamie Dimon said Tuesday that the company is more interested in spending money to invest in its own businesses than to buy new ones.

"It's good discipline to always be looking," Dimon said on acquisitions. "I wouldn't have high expectations that will be how we use a lot of capital. And I think it's a very big plus that we grow organically in every business we're in without having to stretch."

During the company's second-quarter earnings report on Tuesday, the bank said it had decreased its Common Equity Tier 1 ratio to 15%, down from 15.4% in the prior quarter. JPMorgan also logged $15 billion in net income, and upped its net interest income guidance for all of 2025.

Taking a bigger piece of a hot market

When asked about investing more money in one of the hottest areas in banking, private credit, Dimon said not only that a deal is "not high" on his list of priorities, but also that the sector may have peaked. Still, JPMorgan would consider a purchase if it involved "the right people at the right price," the CEO said.

Bank-to-nonbank lending has exploded in recent years. Such loans made up about half of all bank loan growth this year, and totaled some 10% of all loans in the U.S. banking system, according to a Truist Securities report in May. Just 13 of the largest U.S. banks — including JPMorgan — accounted for nearly 80% of the loan balances in the line of business, according to an analysis from Fitch Ratings.

JPMorgan expanded its private credit business in February, allocating $50 billion from its own balance sheet — with space to increase that limit to $100 billion, or even $200 billion — along with $15 billion from several co-lenders.

Dimon said Tuesday that he isn't "against private credit," but reiterated skepticism he's shared previously about its appeal to fund managers and investors.

"I've mentioned that credit spreads are very low. It's grown dramatically over time, and you have to pay up a lot for it," Dimon said. "And I'm not saying it's not going to grow some more, but I would have a slight reluctance depending on who it was."

Lessons learned

Dimon also didn't show much interest in purchasing a large language model, even as the bank looks to invest about $18 billion in technology this year, focused on artificial intelligence. The CEO said there was "no reason" for JPMorgan to own an LLM, though the bank does use them.

Still, JPMorgan has made moves to spend some of the capital cushion it's been shoring up for years, and it wants to keep the ball rolling.

"Clearly, it is a big amount of excess [capital], and that does mean that everything is on the table," said Chief Financial Officer Jeremy Barnum on the Tuesday earnings call. "That includes potentially inorganic things. Now obviously, that needs to be done carefully. I think acquisitions have a high bar, both financially, strategically and importantly, in some cases, culturally."

JPMorgan has been an active acquirer in the past, especially of failed institutions, such as First Republic Bank, which it bought during the banking crisis of 2023. But not all of its investments have paid off.

Read more on JPMorganChase: JPMorganChase | American Banker

The bank is just a few months past the conclusion of the criminal prosecution of the founder of a fintech JPMorgan acquired in 2021. In March, Charlie Javice, the former founder of Frank, was convicted of defrauding JPMorgan of $175 million. Javice, who hasn't yet been sentenced, was found guilty of fabricating customer data to inflate Frank's value.

"We also need to think carefully about things that work outside the regulated perimeter might not work inside the regulated perimeter," Barnum said. "We have learned some lessons. We don't want to over-learn those lessons."

Barnum added that the bank's leaders "wouldn't be doing our job if we weren't thinking about" acquisition opportunities. He added, though, that "it's not easy to imagine a deal that would actually make sense."

Investing in growth vs. buybacks

JPMorgan prioritizes using its capital to invest in both organic and inorganic growth above buybacks, though it did repurchase about $7 billion of common stock in the second quarter, and it recently authorized a new $50 billion repurchase plan.

Dimon has often advertised that he doesn't like buying back the company's stock at its current valuation — nearly triple its tangible book value. The bank's stock was trading at about $286 per share on Tuesday afternoon, up more than 19% year to date.

"It is wise to use our balance sheet for customers, which we're doing," Dimon said. "And we can maybe possibly do more. And it is probably wise to not increase the excess capital anymore, since we have plenty."

He added that JPMorgan is in tight competition with both other banks and fintechs.

For example, Dimon said his bank will be involved in deposit tokens and stablecoins, even though he doesn't understand the advantage of using stablecoins over other forms of payment.

And while the bank is willing to participate in open banking — allowing consumers to share their financial data across companies for ease of use — JPMorgan has recently made waves with its plans to potentially start charging fintechs fees for the data.

The Consumer Financial Protection Bureau had established a rule around sharing consumer data that was slated to take effect in January, and would have barred banks from levying fees related to consumer and third-party access. But the rule was vacated under the Trump administration.

Dimon said Tuesday that JPMorgan is in favor of open banking, if it's "done properly."

Dimon also said that the company has been investing in branches and bankers internationally, as well as in the innovation economy sector, payment systems and wealth management, among other areas.

Barnum added that it would be "hard to imagine a set of conditions that would be any better" for the bank, referring to interest rates, deal activity, capital markets resilience and credit quality.

"We're essentially firing on all cylinders," Barnum said. "We've been investing for a long time very successfully and kind of leaning in, even in moments where from the outside, there wasn't that much appetite for us to be investing."