Why JPMorgan's Ballooning Balance Sheet Could Become a Problem
Typically, investors reward banks for significantly growing their deposit base, especially if they can get those deposits without having to pay out too much interest on them. But JPMorgan Chase's (NYSE: JPM) growing deposit base and ballooning balance sheet could quickly turn into a headache for the bank due to capital regulations the bank must follow. If the regulations are not changed, or certain exclusions are not extended, the bank may be forced to take actions that will not benefit shareholders.
All banks, not just JPMorgan, are dealing with a flood of deposits. On JPMorgan's most recent earnings call, CFO Jennifer Piepszak attributed the issue to the Federal Reserve's quantitative easing program, in which the central bank has purchased government bonds and other securities in order to inject money into the economy and boost activity. There has also been unprecedented government stimulus adding money into the system. As a result, Piepszak notes there has been $3 trillion of domestic deposit growth across U.S. commercial banks.
Image source: JPMorgan Chase.
Source Fool.com
