JPMorgan's Capital Allocation Report Card

Good morning. JPMorgan Chase reports earnings this morning alongside Wells Fargo, Citigroup, BlackRock, and Bank of America. Five of the world's largest financial institutions on the same day. By the time you finish reading this, the numbers will be out.

I don't want to preview the earnings. You can get that from twenty other newsletters. Instead, I want to do something more useful: grade JPMorgan's capital allocation track record over the last decade, explain why the grades matter, and give you a framework you can apply to any company in your portfolio or on your watchlist.

JPMorgan's stock has returned roughly 138% over five years, against about 95% for the S&P 500. That's a 40+ percentage point gap. It's not an accident. It's the result of a capital allocation system that is unusually deliberate for a company of this size.

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THE SCORECARD

JPMorgan Chase: Capital Allocation Report Card

The framework. There are only five things a company can do with its cash: reinvest organically (R&D, technology, capacity, people), acquire other businesses, pay dividends, buy back stock, or strengthen the balance sheet. Every CEO makes these decisions. The research says the ones who outperform tend to have a clear, consistent hierarchy. The ones who underperform tend to follow quarterly pressure and rotate priorities based on what Wall Street wants to hear.

Jamie Dimon has published his hierarchy in multiple shareholder letters. In order: fortress balance sheet first, organic investment second ("the first and most important use of capital," in his words), sustainable dividend third, acquisitions that strengthen competitive position fourth, buybacks with genuine excess capital fifth. Here's how each one played out.

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1. ORGANIC INVESTMENT: A

JPMorgan spent $18 billion on technology in 2025. To put that in context, it's more than all but a handful of pure technology companies. The firm has more than 60,000 technologists on staff. It has expanded its branch network while most competitors consolidated. The consumer bank, commercial bank, and markets business all received sustained investment through the entire rate cycle, up and down.

This is the category that matters most, and it's the one most CEOs get wrong. Yesterday I covered Guest, Kothari, and Venkat's (2023) finding that companies which repurchase stock while simultaneously maintaining investment levels are the ones that outperform over time. JPMorgan is the poster child for that pattern. The buyback program never came at the expense of the technology budget, the branch strategy, or the headcount in revenue-generating divisions.

What makes JPMorgan's organic investment unusual is the consistency. Most companies increase investment when times are good and cut it when times are bad, which is exactly the wrong approach if you believe the investment has a positive net present value. JPMorgan invested through the 2020 shutdown, through the 2022 rate spike, through the 2023 regional banking crisis, and through the 2025 geopolitical volatility. The willingness to invest through cycles is a feature of the capital allocation system, not a one-time decision.

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2. ACQUISITIONS: A-

JPMorgan's M&A track record is unusual in two ways. First, the deals are overwhelmingly opportunistic. Bear Stearns in March 2008 at $10 per share (originally offered at $2 per share before being renegotiated upward after shareholder backlash). Washington Mutual in September 2008 for $1.9 billion, acquiring a company with $307 billion in assets and $188 billion in deposits from the FDIC after the largest bank failure in U.S. history. First Republic in May 2023 for $10.6 billion from FDIC receivership, inheriting $92 billion in deposits and $173 billion in loans.

Each of these deals was done from a position of overwhelming balance sheet strength, at a price that reflected genuine distress in the target, and during a period when no other buyer had the capital or the willingness to act. The academic research on acquisitions, particularly Fich, Nguyen, and Officer's (2018) work on bolt-on deals, consistently finds that disciplined acquirers who buy at attractive prices in limited competition outperform transformational acquirers who pay full price in competitive auctions. JPMorgan's deals fit that pattern precisely.

Second, the deals JPMorgan didn't do are equally instructive. During the 2021 SPAC boom, JPMorgan didn't chase fintech acquisitions at stratospheric valuations. During the 2024 AI frenzy, it didn't make a splashy AI company acquisition to demonstrate relevance. The discipline to not acquire is as important as the discipline to acquire well, and it's far rarer among large-cap CEOs.

The minus is for the Frank Financial Products acquisition in 2021. JPMorgan paid $175 million for a college financial planning platform whose founder, Charlie Javice, claimed over 4 million student users when the real number was fewer than 300,000. She hired a data scientist for roughly $18,000 to fabricate synthetic user data. Javice was found guilty of fraud in March 2025 and later sentenced to 85 months in federal prison with $287.5 million in restitution. It's a small deal relative to a $4 trillion balance sheet, but it's the kind of unforced error that reveals even the best acquirers can be fooled when they step outside their core expertise. Financial services due diligence is JPMorgan's core competency. Consumer technology due diligence is not.

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3. DIVIDEND POLICY: A

JPMorgan's dividend has grown steadily over the last decade, from $1.58 per share in 2014 to approximately $5.80 per share in 2025. The current annualized rate is $6.00 per share ($1.50 quarterly), reflecting mid-year increases that took the quarterly dividend from $1.25 to $1.40 and then to $1.50 over the course of the year. The payout ratio has stayed well below 40% of earnings, which means the dividend is sustainable through a moderate recession without requiring a cut.

Dimon has said repeatedly that the dividend should be "something we can pay in good times and bad." This sounds obvious but it's the opposite of how many companies set their dividends. Energy companies increased dividends during the shale boom and then cut them during the 2020 crash. Regional banks raised dividends to compete with money market rates and then found themselves trapped when deposit costs spiked. A sustainable dividend requires the CEO to set the payout based on trough earnings, not peak earnings. That takes discipline because the board and the shareholders always want more.

The one exception: JPMorgan did cut its dividend in 2009, but that was at the explicit insistence of the U.S. Treasury as a condition of TARP. Every major bank cut simultaneously. It wasn't a JPMorgan-specific decision, and it was reversed as soon as the stress tests allowed it.

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4. BUYBACKS: B+

JPMorgan has returned enormous amounts of capital through repurchases, totaling more than $30 billion annually in recent years. For context, while Goldman Sachs reported $5 billion in buybacks for Q1 2026, JPMorgan executed $8.3 billion in net share repurchases in the exact same quarter.

What separates JPMorgan from the crowd is willingness to slow down. Dimon has publicly said the bank would rather accumulate excess capital than buy back stock at a premium to intrinsic value. He paused buybacks during periods of elevated uncertainty, including during the early stages of the regional banking crisis in 2023. Most CEOs do the opposite, accelerating buybacks when earnings are strong and the stock is expensive, which is exactly the pattern that Milano's (2025) Buyback ROI research identifies as value-destroying.

The reason this gets a B+ rather than an A is that JPMorgan still repurchased aggressively during some periods when the stock was trading at elevated multiples. The willingness to pause is better than most, but it's not perfectly disciplined. A true A would require buying only below intrinsic value, every time, no exceptions. Dimon gets close to that standard, but not all the way.

There's a broader point worth making. In yesterday's newsletter, I walked through the research showing that companies which deploy a greater share of cash flow toward buybacks (as opposed to organic investment) deliver lower total shareholder returns. JPMorgan inverts that pattern. The buyback is large in absolute terms but the $18 billion technology budget dwarfs it as a share of total capital deployment. That ordering is the key insight.

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5. BALANCE SHEET MANAGEMENT: A+

A strong balance sheet is a strategic capital allocation decision.

Dimon maintains CET1 capital ratios well above what regulators require. As of Q1 2025, JPMorgan's CET1 ratio stood at 15.4% against a regulatory minimum of 11.5%, a buffer of roughly 390 basis points, representing approximately $280 billion in CET1 capital. He holds more liquidity than necessary. He keeps the balance sheet positioned for multiple scenarios rather than optimizing for the most likely one.

The obvious critique is that excess capital earns below the firm's cost of equity, which mechanically drags down ROE. Why hold $30 billion in excess capital when you could return it to shareholders?

Because excess capital isn't idle. It's a permanent call option on crisis-level acquisition opportunities.

When Bear Stearns failed in March 2008, JPMorgan could act in 48 hours because it had the capital. When Washington Mutual failed six months later, JPMorgan could act again. When First Republic collapsed in 2023, same thing. No other bank in the country could have absorbed those institutions on that timeline. The excess capital that looked like a drag on ROE during the calm years turned into the most valuable strategic asset in the system during the crises.

The fortress balance sheet also insulates the rest of the capital allocation hierarchy from downturns. JPMorgan never had to cut its technology budget during a crisis because the balance sheet absorbed the stress. It never had to suspend the dividend because the capital cushion was thick enough. The balance sheet is the foundation that makes everything else possible.

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HOW TO USE THIS FRAMEWORK

The Scorecard can apply to any public company. Pull the last five annual reports. Look at where the cash went. Grade each of the five categories. Then ask: does this company have a clear hierarchy, and does the track record match the rhetoric?

Companies where the CEO talks about long-term investment but the cash flow statement shows 60%+ going to buybacks are telling you two different stories. The cash flow statement is the honest one.

Companies where organic investment is growing as a share of total cash flow, the balance sheet is getting stronger rather than weaker, and acquisitions are infrequent and disciplined are the ones the research says will outperform over time. It's not complicated. It's just hard to execute consistently, which is why so few companies do it.

Tomorrow, I'm scoring a company on the opposite end of the discipline spectrum: Paramount Global and its $110 billion acquisition of Warner Bros. Discovery. The Deal Autopsy. I'll run it through five research-backed dimensions and give it a predicted outcome.

Have a good Tuesday.

Marques

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Research cited: Guest, N., Kothari, S.P., & Venkat, P. (2023). Financial Management. · Fich, E., Nguyen, T., & Officer, M. (2018). Journal of Financial Economics. · Clancy, P., Mauboussin, M., et al. (2025). Journal of Applied Corporate Finance. · Garel, A. (2016). Journal of Economic Surveys.

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Marques Blank is the founder of Blank Capital (fractional CFO advisory) and Blank Capital Partners He spent seven years at Northrop Grumman and four years at Citibank in securitized credit. CMA, MBA, Series 65.

This newsletter is for informational purposes only and does not constitute investment advice.