Fourteen Point Six Against Eleven Point FiveWide moat

JPMorgan Chase (JPM) — moat facet

Three points of surplus capital earn nothing for years and then earn several billion dollars in a weekend, which is the whole case for carrying them.

The most consequential number in a bank is the one a regulator sets.

Standardized CET1 ratioWACC ~11.5%15.7%202414.6%202514.1%Jun 2026Capital returned, not lost: net payout was 82% to Dec 2025 and 73% to Jun 2026.
How close to the line management runs it is a forecast of the next rule.

JPMorgan's Standardized common equity Tier 1 requirement, including all regulatory buffers, was 11.5% at the end of 2025. Its actual ratio was 14.6%, on $288 billion of CET1 capital1. By the June 2026 quarter the ratio had come down to 14.1% on $303 billion of capital2 — capital returned rather than capital lost.

Three points of surplus on roughly $2 trillion of risk-weighted assets is something like $60 billion of equity doing nothing in particular. Jamie Dimon has put the excess at $30 to $40 billion above any plausible requirement.

Holding it is not inefficiency; it is optionality with a known cost. Surplus capital lets the firm buy a failing bank on a weekend, absorb a stress scenario without cutting the dividend, and grow the loan book into a downturn when competitors are shrinking. All three have happened.

The cost is arithmetic: equity that earns nothing drags the return on the rest. A 20% return on tangible common equity3 is achieved despite the buffer, not because of it.

The number to watch is the gap. It narrowed by half a point in six months as the firm bought back stock, and how far management is willing to take it is the clearest statement it can make about what it thinks the next rule will say.

Moat trajectory: Narrowing

The surplus is being spent: the Standardized CET1 ratio fell from 14.6% at end-2025 to 14.1% by June 2026 as capital was returned at 73% to 82% of earnings. That is management's choice, and it leaves less room.

The number that tests this moat
Reported
Net payout ratio
82% to Dec 2025, 73% to Jun 2026

The firm returning most of what it earns while the CET1 ratio falls from 14.6% to 14.1%. Surplus capital earns nothing for years and then earns several billion dollars in a weekend, so how far management runs it down is a statement about what it expects the next capital rule to say.

Source: JPMorgan Chase second-quarter 2026 earnings release ↗
⚠ Threats to the moat
⚠ THREAT 01
Surplus Capital Is a Bet on Uncertainty, Not a Cushion
The real risk is not that the buffer is too small but that it gets spent into a friendly regulatory cycle and is missing when the cycle turns.
References
  1. ReportedBasel III CET1 capital of $288bn, a Standardized ratio of 14.6%, against a requirement including all regulatory buffers of 11.5%.
    JPMorgan Chase & Co., Form 10-K FY2025 — capital risk management (SEC, CIK 19617). Basel III common equity Tier 1 capital of $288 billion and a Standardized CET1 ratio of 14.6%; the Standardized CET1 requirement including all regulatory buffers was 11.5%. The stress capital buffer requirement is 2.5% and remains in effect through 30 September 2027, based on the severely adverse scenario of the Federal Reserve's supervisory stress test; the annual CCAR submission was due 6 April 2026. Capital is allocated to the lines of business using standardized risk-weighted assets and the GSIB surcharge under rules currently in effect, reassessed at least annually. The enhanced supplementary leverage ratio rules revise the static leverage buffers to 50% of the bank holding company's US Method 1 GSIB surcharge, capped at 1% for insured depository institution subsidiaries. The July 2023 proposal to amend the US risk-based capital framework (the Basel III endgame) was never finalised; in September 2025 the Federal Reserve's Vice Chair for Supervision indicated regulators may issue an updated proposal in early 2026 replacing it, the timing and content of which remain uncertain. The Apple Card transaction reduced the Standardized CET1 ratio by approximately 25 basis points. — FY2025 · publ. 2026-02-13 · source ↗
  2. ReportedThe Standardized CET1 ratio was 14.1% on $303bn of capital in the June 2026 quarter.
    JPMorgan Chase & Co., second-quarter 2026 earnings release (Form 8-K, exhibit 99.1) — net income $21.2bn ($7.70 per share), or $16.9bn ($6.14) excluding significant items; ROE 24%, ROTCE 29% and ROTCE excluding significant items 23%. Reported revenue $57.3bn and managed revenue $58.0bn; expense $27.3bn with a reported overhead ratio of 48%; credit costs $2.5bn with $2.4bn of net charge-offs and a $149M net reserve build. Average loans up 10% year on year and average deposits up 7%. CET1 Standardized 14.1% and Advanced 14.2%, total loss-absorbing capacity $590bn, Standardized RWA $2.1tn, cash and marketable securities $1.5tn; book value per share $133.01 up 9% and tangible book value per share $113.35 up 10%; Basel III CET1 capital $303bn; supplementary leverage ratio 5.5%; net payout over the last twelve months 73%. Segment returns: CCB ROE 34% with client investment assets up 21%, a Card Services net charge-off rate of 3.34%, card sales volume up 10% and active mobile customers up 6%; CIB ROE 22% with investment banking fees up 30% year on year, a #1 ranking for global investment banking fees at 9.3% wallet share year to date, markets revenue up 35% with fixed income up 6% and equity markets up 86%, and average client deposits up 11%; AWM ROE 48% with AUM of $5.1tn, up 18%. Significant items were a $4.6bn net gain related to Visa shares ($1.27 of EPS) and $1.0bn of gains on certain equity investments ($0.29). Jamie Dimon: 'These results were the product of a particularly favorable environment with an elevated level of market activity, as well as rigorous execution, years of consistent investment and thoughtful capital deployment.' — Q2 2026 · publ. 2026-07-14 · source ↗
  3. Reported2025 net income $57,048M, diluted EPS $20.02, return on equity 17% and return on tangible common equity 20%.
    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