Extracts from annual shareholder letter from Jamie Dimon, Chairman and Chief Executive Officer, JPMorganChase:

Across the globe, 2024 was yet another year of significant challenges, from the terrible ongoing war and violence in Ukraine and conflicts in the Middle East to ongoing terrorist activity and growing geopolitical tensions, importantly with China. Our hearts go out to those whose lives are profoundly affected by these events.

JPMorganChase, a company that historically has worked across borders and boundaries, will do its part to ensure that the global economy is safe and secure, but it is not immune to the effects of these events. Two things are absolutely foundational to the long-term success of JPMorganChase: one is whether we run a great company and two, which is maybe more important, is whether the long-term health of America, domestically, and the future of the free and democratic world are strong. In the first two sections of this letter, I deal with these critical issues. And in the third and fourth sections, I talk about specific issues unique to JPMorganChase and how we are addressing them, including constantly fighting complacency, arrogance and bureaucracy.

Despite the unsettling landscape, the U.S. economy, at least until recently, continued to be resilient, with consumers still spending (though with some recent weakening) and businesses still healthy. It is important to note that the economy has been fueled by large amounts of government deficit spending and past stimulus. There also remains a growing need for increased expenditure on infrastructure, the restructuring of global supply chains and the military, which may lead to stickier inflation and ultimately higher rates than markets currently expect. The recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession. And even with the recent decline in market values, prices remain relatively high. These significant and somewhat unprecedented forces cause us to remain very cautious. There is much more detail on all of this in section three.

2024 was another strong year for JPMorganChase, with our firm generating record revenue for the seventh consecutive year, as well as setting numerous records in each of our lines of business. We earned revenue in 2024 of $180.6 billion¹ and net income of $58.5 billion, with return on tangible common equity (ROTCE) of 20%², reflecting strong underlying performance across our businesses. We also increased our quarterly common dividend of $1.05 per share to $1.15 per share in the first quarter of 2024 – and again to $1.25 per share in the third quarter of 2024 – while continuing to reinforce our fortress balance sheet. We grew market share in several of our businesses and continued to make significant investments in products, people and technology while exercising strict risk disciplines.

Only America has the economic, military and, yes, moral power.

I am writing about this topic, both as a patriot who cares about America’s and the free world’s future and as the CEO of our company, because it may be the most critical factor affecting the future of JPMorganChase itself. The success of JPMorganChase has always been predicated on the success of the United States of America and the health of the world, particularly the strength of free and democratic countries.

Whether you call them adversaries or major competitors, they have made their goal clear. We must act now.

The brutal invasion of Ukraine and the indescribable terrorist acts on Israel should have dispelled any illusion that the world is a safe place. We do not need another Pearl Harbor or 9/11 to shatter any false sense of security based on the hopeful notion that dictators, terrorists and oppressive nations won’t use their economic and military powers to advance their aims – particularly against what they perceive as weak, incompetent and disorganized Western democracies. Global peace and world order are vital American interests. We also need to answer the question: What kind of world do we want to live in? And do we believe that we can, or should, try to make the world a better place? Practically, what is the other choice?

Our international adversaries and major competitors have made it clear that their goal is to dismantle American hegemony, which means dismantling the rules-based system led by America in concert with our allies (essentially the Bretton Woods system and the North Atlantic Treaty Organization, as well as the International Monetary Fund and the United Nations). Since the end of World War II, this system has brought forth the longest period of peace and prosperity among the great powers. Today, it is clear this system needs serious reform and strengthening, not total destruction. Yet, if given the opportunity, that is exactly what our adversaries want to happen: Tear asunder the extensive military and economic alliances that America and its allies have forged. In the multipolar world that follows, it will be every nation for itself – giving our adversaries the opportunity to set the rules and use military and economic coercion to get what they want. That is what is at stake here. We need to bring the whole of government and the private sector together to build the world we want while dealing with the cold realities of the world we have.

We face the most perilous and complicated geopolitical and economic environment since World War II. Today’s world is more complex and more interconnected than ever before. Comprehensive strategies, diligently deployed, are required to address challenges on many fronts: the war in Ukraine; terrorism in the Middle East and the real possibility that Iran may develop a nuclear weapon; Europe’s potential fragmentation; and ongoing trade disputes and the rise of China. If Iran acquires a nuclear weapon, many other nations around the world will seek to acquire nuclear weapons, presenting us with a catastrophic situation. A global nuclear arms race is the worst outcome that could happen to our world – and this may be the greatest threat to mankind’s survival. Lastly, it is extremely important to recognize that security and economics are interconnected – “economic” warfare has caused military warfare in the past.

Not only is America’s global leadership role being challenged outside our borders by other nations but also inside our borders by our polarized electorate.

The actions taken in the next decade may prove, depending on how our country and our allies perform, the most consequential of our lives and may very well determine the fate of the free and democratic world over the next century. America has always had an amazing ability to confront enormous challenges – and we did so by facing them head-on with superb leadership from Abraham Lincoln to FDR to Dwight Eisenhower. We should remember that America, “conceived in liberty and dedicated to the proposition that all men are created equal,” still remains a shining beacon of hope to citizens around the world.

Here are five things our nation needs to do well in order to secure the future we should want for our country and our companies. I fear that if we fail at one of them, we may fail overall:

1. Celebrate America’s values and virtues, with humility, in order to restore civic pride, citizenship and purpose.
2. Acknowledge and fix our problems at home by regaining common sense and being resolute.
3. Recognize that the best strategy for America’s success is to implement effective domestic policies that drive robust economic growth for the benefit of all citizens.
4. Initiate comprehensive economic foreign policy to win the new global “economic” war. America will be first—but not if it is alone.
5. Affirm that our national security and the world’s best military, at whatever cost, are paramount and necessary for peace.

These are my prescriptions, and I understand that some people may disagree with them – and, on some issues, I may ultimately be wrong. What I am not wrong about, however, is the urgent need to face these issues head-on—we should not assume that America will overcome them. We have always been a resilient nation and have overcome significant adversity in the past because we faced our challenges and dealt with them properly. Problems don’t age well. And the consequences of not dealing with this properly range from bad to catastrophic.

Economic fragmentation from our allies may be disastrous in the long run.

Keeping our alliances together, both militarily and economically, is essential. The opposite is precisely what our adversaries want. Europe has some serious issues to fix. Since 2008, the eurozone’s GDP per person has gone from over 75% of U.S. GDP per person to approximately 50%. While Europe has received some tough messages from U.S. leaders recently, what European leaders should do is seize the moment. European nations know what they need to do: significantly reform their economies so they can grow; e.g., finish the economic union to make commerce across their countries easier and more efficient, and initiate labor reform and tax reform to incent more business growth and more labor participation (see the Draghi report). They also recognize that they need to materially increase their military spend and capabilities. This is going to be hard, but our country’s goal should be to help make European nations stronger and keep them close.

We can strengthen our financial system and markets.

While we have the best financial system in the world, it can always be improved. And of course, our financial system should have good consumer protections to prevent Americans from being tempted to purchase bad products or being misled, as well as strong regulations to protect the country from the failure of financial institutions. Since the great financial crisis (the financial system deserved a lot of the negative attention it received), we’ve made many improvements to regulations. However, as usual in a crisis, we also overreacted.

Fundamentally, we need a dynamic regulatory structure that facilitates growth and innovation rather than one that continuously imposes top-down mandates or promotes the constant demonization of corporations and financial services. Shortsighted and misguided policies often sound good politically but usually have unintended consequences that frequently hurt the very people those policies are trying to help. Healthy financial systems are the lifeblood of a healthy economy. You only need to look at many countries around the world to see the damage done to their economy by misguided financial policies and regulations. I’d like to suggest a few ways we can make our regulatory system better for all Americans.

We need to improve bank regulations. 

It is a completely false narrative that there has been any type of looser regulation on the largest banks since the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was passed. Capital requirements and other regulations have been on a relentless march upward even as banks have become proportionally smaller within the financial system (see chart on page x). All of this makes banking and banking services (loans) not only more expensive but less available; these costs eventually will be passed on to the consumer and businesses and result in a slower-growing economy.

Dodd-Frank did do some good things, mostly by improving capital and liquidity requirements and by creating resolution mechanisms for failed investment banks. But even for the regulators, Dodd-Frank set up a balkanized and dysfunctional regulatory system with too many cooks in the kitchen. This is hard for the regulators as well as the banks – not only does it result in excessive and duplicative regulations, but it also makes it more difficult for regulators to be responsive and nimble in a rapidly changing environment. You might ask why has it taken 10 years to finish Basel III?

The enormous rules and regulations by multiple regulators that make up the Comprehensive Capital and Analysis Review (CCAR) stress test and examination are tens of thousands of pages long; our most recent Resolution and Recovery plan was 80,000 pages long; and the regulations around global systemically important banks (G-SIB), liquidity, trading and operational risk have proved to be absurd and even harmful. Many of the tests we are required to perform are not even remotely accurate in measuring true risk – and this causes distortions on how and when capital is allocated and creates large opportunities for unnecessary arbitrage.

The CCAR stress test, in particular, is highly flawed. While it essentially repeats the conditions during the great financial crisis, it does not take into account any of the structural improvements to regulations, underwriting and product offerings since then. The reported results of the test do not come close to anything that would actually happen if the hypothetical scenarios were to happen – they unfairly misled the true strength of the banks. The numbers are simply inaccurate. It would be far better to perform accurate testing, and then if the regulators wanted to add conservatism on top of that, they should do so prudently and transparently. I have mentioned many times before that we conduct hundreds of stress tests a week to protect ourselves from a wide range of possible bad outcomes – not just the CCAR scenarios.

The supplementary leverage ratio and G-SIB capital rules also treat U.S. Treasury securities and repurchase agreements as far riskier than they actually are. And the liquidity coverage ratio treats all other securities and loans as riskier than they are. These rules effectively discourage banks from acting as intermediaries in the financial markets – and this would be particularly painful at precisely the wrong time: when markets get volatile.

So now is a good time to go back and ask basic questions that should have been asked before and, in fact, were required to be asked by legislation: What is the cost/benefit of these rules, and what is the interplay between them? What do you want the expected outcome to be? For example, do you want mortgages and leveraged lending outside the banking system? Many of these rules incent capital and even companies to be private as opposed to public. Financial risks have grown dramatically outside of the banking system, where there may not be the same liquidity or transparency. We have created large and sometimes leveraged arbitrage opportunities. Similar products now have completely different rules and requirements. The chart on page X shows the extraordinary growth in nonbank institutions and in private credit and private companies. Is this what we wanted?

Additionally, we have not adequately understood how the extensive changes that regulations had on loans and liquidity affected money supply and monetary policy and, therefore, the growth of the economy. Banks used to lend out nearly 100% of their deposits, and now they lend approximately 70%. Before the great financial crisis, banks had less than 15% of their assets held as liquid assets, and they now hold over 30%. If that capital and liquidity, now sitting idle, could be put to better use driving the economy without creating additional risk, shouldn’t we do this? Again, what is the effect of all this, and is this what we wanted to achieve?

I do believe if we take a proper re-look, we can create more liquidity in the system and more clarity in resolution, eliminate most bank runs and reduce the cost of any bank failure, increase the amount of credit while lowering its cost, simplify regulations and improve access to banking for the unbanked – all the while maintaining a safe and sound banking system. Shouldn’t those be our collective goals?

One final point: If all these rules ended up being properly modified, JPMorganChase would be in a position to extend, over time, hundreds of billions of dollars in extra lending annually. Many other banks would be in the same position.

Source: JP Morgan