When Jamie Dimon turned to competitive threats in his shareholder letter this year, the chief executive officer of JPMorgan Chase & Co. did something unusual: He named some. Citadel Securities LLC and Revolut Ltd. were two of the firms Dimon picked out. He could also have added Apollo Global Management Inc. and even Pacific Investment Management Co.
Right now, financial firms from different disciplines are veering into each others’ lanes more freely than at any time since the 1990s. This blurring of business lines is going to accelerate with the White House push for deregulation in banking and markets. Technology, too, keeps making it easier and cheaper to strike out into new fields. For clients, that could be great news. Competition can drive down costs, make markets more efficient and benefit anyone who needs to borrow or trade. But history shows there can also be major downsides. Too much finance can be a dangerous thing when it leads to poor credit judgement, excess lending and weak risk management.
Sure, new ways of trading, lending and gathering assets — and the new companies doing these things — have been bubbling away for more than a decade. However, what was once a set of fast-moving, small and narrowly focused upstarts has been gaining critical mass and diversifying into more areas. For example, Revolut, which began as a digital foreign-currency exchange, is adding banking licenses in the UK and US and aims to increase lending as well as helping its customers trade stocks and crypto.
Or take the two best-known electronic market makers, Citadel Securities and Jane Street LLC. In 2025, the latter doubled its revenue to $40 billion, setting fresh records. More surprising was that it overtook the biggest trading desks on Wall Street, led by JPMorgan, which made $36 billion in stock and bond markets last year. But the core business of using computers to quickly and cheaply match buy and sell orders in stocks and ETFs is only part of what has driven Jane Street’s extremely rapid growth — and banks are only one of its competitors.
It borrows from big investment banks like Goldman Sachs Group Inc. to juice the returns on its own proprietary market bets, where it is up against major hedge funds. Another portion of its knock-out results comes from the soaring values of investments it has made in successful tech companies, like Anthropic PBC and CoreWeave Inc. So it’s competing with venture capital, too.
Citadel Securities, meanwhile, is rivaling banks in more traditional ways. One of those is to depart from high-speed market making and build more human relationships with big, traditional fund managers to help them sell large stakes in companies through block trades. The firm is betting that its intelligence on retail investors through its electronic trading business will help it sell shares on behalf of those fund managers more efficiently than the traditional banks can. It aims to steal some clients and market share.
Banks also have multi-faceted “frenemy” relationships with private credit managers. The two sides have been battling it out to make loans to private-equity buyouts for years — even as the banks help find deals for private funds and lend them money, too.
Today, private credit is going through a bumpier spell with some investors, mostly wealthy individual and retail clients, who are spooked by fears of rising defaults and seeing that their money is harder to get back than they hoped. Other types of institution are looking to take advantage of the tumult, supplying fresh funding in the sector at higher yields. Pimco, for instance, funded an entire $400 million bond issue for one struggling manager, Blue Owl Capital Inc., some of which it will resell to other investors, like an investment bank does. The California-based fund manager has also been lending through private bonds to Gulf states in need of funding during the disruption caused by war.
Banks, too, are seeing an opportunity to push further into private credit. In spite of Dimon’s misgivings about weak lending standards in the sector, JPMorgan already offers a choice between whatever loans or bonds a borrower wants to use, and now it is raising new private-credit funds in its own asset management arm. The loosening of capital rules being proposed by the Federal Reserve could yet encourage more banks to offer this kind of lending off their own balance sheets, too.
Last but not least, the big alternative asset managers are reaching further afield to hunt out sources of fees to keep their own shareholders happy. Among these, Apollo almost does it all. The firm underwrites loans to consumers, businesses and projects of all shapes and sizes, it sells some of these to other insurers or asset managers and it creates asset-backed bonds to sell into markets. It manages funds and runs an insurer, too. Is there anyone it doesn’t compete with?
Meanwhile, one of the main ways banks have been protecting themselves against all this encroachment is by lending more money to hedge funds, private asset managers and any other non-bank that wants to boost its own power to lend and trade. The Fed last year gave them greater capacity to do this by letting big banks run with higher leverage ratios. Goldman Sachs started this year leaning into into that.
In short, everyone is all up in everyone else’s business — and it’s only getting more crowded. For anyone who wants access to financial leverage, this could be great news, but that should worry the rest of us. The economist Barry Eichengreen saw the deregulation of the 1990s as a key factor that disturbed the cozy lives and easy fees of bankers and others, which, with the help of new technology, fostered a new sense of hubris and risk taking.
Bear Stearns & Co., for example, could no longer rake in easy stock-broking commissions, so it borrowed heavily and ploughed money into collateralized debt obligations and mortgage bonds. Northern Rock and Dresdner Bank in the UK and Germany loaded up on short-term funding and did something similar. These firms were far from alone. “Institutions feeling the chill winds of competition took on more risk in the effort to maintain customary profit margins,” Eichengreen wrote in his history of the dollar, Exorbitant Privilege. The upshot was the 2008 disaster.
I’m not saying history is about to repeat itself, but I am hearing an awful lot of rhymes. The financial world is going through an unusually dynamic period of evolution — and it is happening at a very unsettled time in business and politics. We all need to keep in mind this lesson of the past: Competition can be very creative, but it also destroys.
A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
Read more articles by Paul Davies
