✦ Joining the Arbitrage Instead of Losing to ItThin moat

JPMorgan Chase (JPM) — the future bets

Competing in private credit means accepting a structurally lower return on the same asset, or accepting the risk the capital requirement exists to cover.

There are two ways to respond to a competitor that operates outside your rules. JPMorgan appears to have chosen both.

Two positions held at onceThe 10-K saysPrivate credit expansion is a systemic riskManagement saysIt will keep investing in private creditThe funding edgeDeposits at 1.80% against fund capitalThe costRegulatory capital a fund does not holdLoans-to-deposits is 58% and rising - where a balance-sheet push would first appear.
Meeting the borrower where they went, at a structurally lower return.

Its filings describe the expansion of private credit as a systemic concern, warning that interconnectivity across credit markets increases the risk that it could worsen losses among non-bank lenders and their borrowers if stress spreads to broader funding and credit markets1. And management has said the firm will continue investing in private credit, despite concerns about cracks in asset quality2.

The logic is straightforward. Direct lending has taken origination that used to be a bank's, and the choice is to lose the borrower or to meet the borrower where they now are — using the balance sheet directly rather than syndicating the loan on. A bank with $2.56 trillion of deposits at an average cost of 1.80%3 funds that activity more cheaply than any fund can.

The complication is the one JPMorgan itself names. Loans held directly consume regulatory capital that a fund does not have to hold, which is the whole reason the business migrated. Competing in it means accepting a structurally lower return on the same asset, or accepting the risks the capital requirement exists to cover.

Watch the loans-to-deposits ratio, at 58% and rising4. That is where a decision to deploy the balance sheet into direct lending would first become visible.

Moat trajectory: Holding steady

Management has said it will keep investing in private credit despite concerns about asset quality. It is a stated intention rather than a disclosed allocation.

The number that tests this moat
Reported
Credit and capital raised for corporations and non-U.S. governments, year to date
$1.7 trillion (H1 2026)

JPMorgan intends to compete with private credit by arranging and funding more of the same deals. The amount of credit and capital it arranges is where that shows; no separate private-credit allocation is disclosed yet.

Source: JPMorgan Chase Q2 2026 results ↗
References
  1. ReportedThe 10-K warns that the interconnectivity across credit markets increases the risk that the significant expansion of private credit could worsen losses among non-bank lenders and their borrowers, particularly if stress or defaults spread to broader funding and credit markets.
    JPMorgan Chase & Co., Form 10-K FY2025 — risk factors and competition (SEC, CIK 19617). 'Competitors include other banks, brokerage firms, investment banking companies, merchant banks, hedge funds, commodity trading companies, private equity firms, insurance companies, mutual fund companies, investment managers, credit card companies, mortgage banking companies, trust companies, securities processing companies, automobile financing companies, leasing companies, e-commerce and other internet-based companies, digital asset and other financial technology companies.' 'New competitors in the financial services industry continue to emerge, including firms that offer products and services solely through the internet and non-financial companies that offer products and services that disintermediate traditional banking products and services offered by financial services firms such as JPMorganChase.' The risk factors further warn that advocacy by non-banking competitors for exemptions from regulatory requirements could significantly disadvantage traditional financial institutions; that if the firm does not keep pace with rapidly changing technological advances, including the adoption of generative AI, it risks losing clients and market share, with competition intensified as the feasibility, capability and scalability of new technologies improves; that adverse macroeconomic or market conditions could prompt outflows from funds or accounts or cause clients to invest in products that generate lower revenue; and that the interconnectivity across credit markets increases the risk that the significant expansion of private credit could worsen losses among non-bank lenders and their borrowers, particularly if stress or defaults spread to broader funding and credit markets. — FY2025 · publ. 2026-02-13 · source ↗
  2. Third-party estimateManagement has said the firm will continue to invest in private credit despite concerns about cracks in asset quality.
    Peer analysis of the large US banks — Bank of America's return on tangible common equity is projected by analysts to improve to 18% over the next two years; its shares closed at $63.81 on 11 August 2026, implying a price-to-tangible-book multiple of roughly 2.2 times against tangible book value per share of $29.37. In the second quarter of 2026, net income rose 41% at JPMorgan, 84% at Goldman Sachs, 58% at Morgan Stanley, 27% at Bank of America, 45% at Citigroup and 17% at Wells Fargo. — Q2 2026 · publ. 2026-08 · source ↗
  3. ReportedThe average rate paid on total deposits was 1.80% in 2025, against 2.08% in 2024 and 1.70% in 2023.
    JPMorgan Chase & Co., Form 10-K FY2025 — consolidated financial statements and management's discussion (SEC, CIK 19617). Total net revenue $182,447M (2024 $177,556M, 2023 $158,104M); total noninterest expense $95,640M (2023 $87,172M); pre-provision profit $86,807M; provision for credit losses $14,212M; net income $57,048M; diluted EPS $20.02; ROE 17%, ROTCE 20% (2024 22%, 2023 21%); overhead ratio 52% (2024 52%, 2023 55%); loans-to-deposits 58% (56%, 55%); deposits 63% of total liabilities. Total assets $4,424,900M, loans $1,493,429M, deposits $2,559,320M, tangible common equity $290,018M, book value per share $126.99, tangible book value per share $107.56, dividends declared per share $5.80 (2024 $4.80, 2023 $4.10). Segment total net revenue: CCB $76,029M / $71,507M / $70,148M; CIB $78,454M / $70,114M / $64,353M; AWM $24,073M / $21,578M / $19,827M. Banking & Payments by client coverage: Global Corporate Banking and Global Investment Banking $25,285M, Commercial Banking $11,851M. Deposit average balances and rates: US non-interest-bearing $572,014M (2024 $611,734M, 2023 $635,791M); US interest-bearing demand $321,145M at 3.26%; US savings $875,519M at 1.41%; total deposits 1.80% (2024 2.08%, 2023 1.70%). An estimated bargain purchase gain of $2.8bn was recorded for the year ended 31 December 2023 on the First Republic acquisition, with a further $588M First Republic-related gain in the first quarter of 2025; 2024 revenue included a $7.9bn net gain on Visa shares. — FY2025 · publ. 2026-02-13 · source ↗
  4. ReportedLoans of $1,493,429M against deposits of $2,559,320M — a loans-to-deposits ratio of 58%, from 56% and 55%.
    JPMorgan Chase & Co., Form 10-K FY2025 — consolidated financial statements and management's discussion (SEC, CIK 19617). Total net revenue $182,447M (2024 $177,556M, 2023 $158,104M); total noninterest expense $95,640M (2023 $87,172M); pre-provision profit $86,807M; provision for credit losses $14,212M; net income $57,048M; diluted EPS $20.02; ROE 17%, ROTCE 20% (2024 22%, 2023 21%); overhead ratio 52% (2024 52%, 2023 55%); loans-to-deposits 58% (56%, 55%); deposits 63% of total liabilities. Total assets $4,424,900M, loans $1,493,429M, deposits $2,559,320M, tangible common equity $290,018M, book value per share $126.99, tangible book value per share $107.56, dividends declared per share $5.80 (2024 $4.80, 2023 $4.10). Segment total net revenue: CCB $76,029M / $71,507M / $70,148M; CIB $78,454M / $70,114M / $64,353M; AWM $24,073M / $21,578M / $19,827M. Banking & Payments by client coverage: Global Corporate Banking and Global Investment Banking $25,285M, Commercial Banking $11,851M. Deposit average balances and rates: US non-interest-bearing $572,014M (2024 $611,734M, 2023 $635,791M); US interest-bearing demand $321,145M at 3.26%; US savings $875,519M at 1.41%; total deposits 1.80% (2024 2.08%, 2023 1.70%). An estimated bargain purchase gain of $2.8bn was recorded for the year ended 31 December 2023 on the First Republic acquisition, with a further $588M First Republic-related gain in the first quarter of 2025; 2024 revenue included a $7.9bn net gain on Visa shares. — FY2025 · publ. 2026-02-13 · source ↗
Sources
Generated September 23, 2026