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1/n Banking is risky, as they are the leveraged 10:1 or worse but that's not bad in the good times.
Taking the context of how JP Morgan Chase, the largest bank in the United States dealt with the 2008 Great Financial Crisis: Thread.
Taking the context of how JP Morgan Chase, the largest bank in the United States dealt with the 2008 Great Financial Crisis: Thread.
2/n Their profits did decline by 60%. (PROFITABLE.)
Total assets went up 38%
Advances up by 43%
Deposits up by 36%
& Liquidity increased up a bit during the worst crisis since 1929 THE GREAT DEPRESSION.
Bought Bear Sterns & Washington Mutual on pennies. (more on that later)
Total assets went up 38%
Advances up by 43%
Deposits up by 36%
& Liquidity increased up a bit during the worst crisis since 1929 THE GREAT DEPRESSION.
Bought Bear Sterns & Washington Mutual on pennies. (more on that later)
3/n They were one of the first to talk about the upcoming storm & prepared for the upcoming economic downturn.
Accepted the uncertainty & prepared for the worst conditions.
Accepted the uncertainty & prepared for the worst conditions.
4/n They messed up with their mortgage broking business. Accepted it & made the changes.
Obviously, people do mistakes in business but that doesn't mean you close that shop as wall street asks you to do so. You get better & address the opportunity with a little bit of optimism.
Obviously, people do mistakes in business but that doesn't mean you close that shop as wall street asks you to do so. You get better & address the opportunity with a little bit of optimism.
5/n Credit cards businesses had a nosedive. This is what they did:
- Intensified collection efforts+ restructuring of stressed accounts
- Closed Inactive accounts & stringent standards for fresh lending.
projected for a no-profit year (had a 2.2B$ loss next year)
- Intensified collection efforts+ restructuring of stressed accounts
- Closed Inactive accounts & stringent standards for fresh lending.
projected for a no-profit year (had a 2.2B$ loss next year)
6/n MINDSET: the best of entrepreneurs always go for solving the customer's problem: the cost of banking. The PULL business: they will come as you have the best product.
Other things, in a big organisation, kill it slowly as explained below.
Other things, in a big organisation, kill it slowly as explained below.
7/n On their 2 acquisitions:
- Bought them with a high margin of safety & conservative assumptions.
"We were not buying a house- We were buying a house on fire."
- Raised 11.5b$ to maintain a strong capital base.
- Gained a better franchise+ huge Deposits (Investing).
- Bought them with a high margin of safety & conservative assumptions.
"We were not buying a house- We were buying a house on fire."
- Raised 11.5b$ to maintain a strong capital base.
- Gained a better franchise+ huge Deposits (Investing).
8/n How they avoided blowing up:
- Reduced subprime mortgage exposures in 2006+ Never went into the CDO or the CDO squared businesses.
- No ALM mismatch.
- Best capital ratios in the Industry.
- Reduced subprime mortgage exposures in 2006+ Never went into the CDO or the CDO squared businesses.
- No ALM mismatch.
- Best capital ratios in the Industry.
9/n It is in Human Nature to pinpoint rather than show gratitude, especially the market commentators who are more than focused on their TRPs than the results.
Appreciation for how the Govt. & the FED acted.
Appreciation for how the Govt. & the FED acted.
10/n Heard Regulators were the main culprit, was it really?
"In each and every circumstance, the responsibility for a company’s actions rests with us, the CEO and
the company’s management."
Basel 2 & 2.5 failed, these are the shortcomings of Basel 3: https://marketrealist.com/2014/09/shortcomings-basel-3-accord/
"In each and every circumstance, the responsibility for a company’s actions rests with us, the CEO and
the company’s management."
Basel 2 & 2.5 failed, these are the shortcomings of Basel 3: https://marketrealist.com/2014/09/shortcomings-basel-3-accord/
n/n In short, they survived & thrived.
“I constantly ask myself what is the baggage of history and what are the lessons of history” — Uday Kotak
“I constantly ask myself what is the baggage of history and what are the lessons of history” — Uday Kotak
