JPMorgan Chase nears historic $4 trillion of assets. Is that good?

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America's biggest bank is on the verge of $4 trillion of assets, a threshold yet to be crossed by any U.S. bank. 

Assets at JPMorgan Chase totaled $3.9 trillion at the end of the third quarter, almost 24% higher than those of the bank's next closest competitor, Bank of America. JPMorgan reached $3 trillion of assets less than four years ago.

The bank is nearing the $4 trillion milestone at a time when regulators are reassessing the capital requirements they will apply across the banking industry. The capital reform measures being floated by a trio of federal banking regulators would have the most pronounced impact on global systemically important banks, according to regulators. JPMorgan's growth also could reinvigorate long-held concerns that a large majority of the industry's assets are concentrated in a handful of banks and that these institutions are "too big to fail."

"The scale [of JPMorgan] has some advantages, but the escalating complexity of managing such a bank has disadvantages," said Peter Nerby, a senior vice president at Moody's Investors Service who covers the bank. "There are a lot of banks that are becoming big and hard to manage, and JPMorgan so far, for the most part, is proving to be the exception."

A surge in deposits, a resilient U.S. economy and JPMorgan's surprise rescue of First Republic Bank last spring have driven much of JPMorgan's explosion in assets over the past four years. Big banks like JPMorgan benefited more than their smaller counterparts when consumers and companies alike started stashing excess cash in their bank accounts during the COVID-19 pandemic. JPMorgan and other large banks quickly turned those deposits into loans or placed them into government Treasuries, and the returns from those investments further boosted big-bank asset levels.

JPMorgan has grown its assets at a faster rate than the rest of its big-bank counterparts over the past four years. Total assets at JPMorgan have risen 45% since the third quarter of 2019. At Bank of America and Citigroup, assets rose 30% and 21%, respectively, over the same period. 

Wells Fargo, the country's fourth-largest bank, has been under an asset cap imposed by the Federal Reserve since early 2018. The cap prohibits Wells from surpassing $2 trillion of assets and stems from the bank's numerous compliance issues, including its well-publicized fake-accounts scandal. 

JPMorgan's assets got another boost after its May deal for First Republic, including most of the failed bank's $229 billion of assets. JPMorgan CEO Jamie Dimon played a key role in the banking industry's attempted rescue of First Republic. Dimon and the leaders of 10 other big banks deposited $30 billion at First Republic in April of this year in an attempt to shore up customer confidence in the San Francisco lender. When that plan didn't work, Dimon worked with regulators on a last-minute rescue by JPMorgan.

The First Republic deal resulted in "better retention of assets than we might have thought," Dimon said at a Barclays conference in September. 

Eric Thayer/Bloomberg

Acquisitions have long been part of JPMorgan's growth strategy, but its targets have been limited to struggling banks in recent years. JPMorgan's most recent acquisition of a nondistressed bank was its deal for BankOne in 2004. 

"Since 2007, it's mainly been acquisitions that were done in periods of distress when JPMorgan had a clean and strong balance sheet and could easily absorb whatever problem children the regulators had," said Chris Kotowski, a managing director at Oppenheimer who covers the bank. "[Dimon] used those acquisitions to expand the franchise."

JPMorgan expects First Republic's thriving wealth management division will bring "meaningful acceleration" to the bank's own wealth management arm, Jennifer Piepszak, co-CEO of JPMorgan's consumer and community banking business, said at the bank's investor day in May.

Also driving asset growth is the bank's consumer arm, where assets are growing at a faster rate than many of the bank's other business lines. Assets in JPMorgan's consumer and community banking unit rose to $623 billion in the third quarter, up 25% from the same period last year. 

"Our assets have quadrupled over the last 10 years and are growing fast," Chief Operating Officer Daniel Pinto said of JPMorgan's consumer banking segment during the bank's investor day.

Lenders across the country have benefited from consumers' increasing reliance on credit cards and personal loans in recent months, when credit card balances reached $1 trillion for the first time on record.

The strength of the economy will play the biggest role in determining the future growth rate of JPMorgan's balance sheet, analysts said. The prosperity of large banks is often closely linked to overall economic performance since big financial institutions have a wide range of customers, from individual consumers to multinational corporations.

CEOs of banks are more likely than their counterparts in other industries to express confidence in future economic growth, according to KPMG survey data announced this week. About 77% of bank chief executives said they were confident about the economic growth prospects in the banking sector over the next three years, according to KPMG.

"The loan growth story is going to be driven by the economic environment," JPMorgan Chief Financial Officer Jeremy Barnum on an October earnings call.