When CEOs suddenly become honest, they might just be telling someone something
Investors are used to hearing company executives sugarcoat the performance of their business. So it is surprising to hear a frank admission that “despite our best efforts, the moats that protect this company are not particularly deep”.
Monopolistic companies, in contrast, need to take care not to attract scrutiny of policymakers so they might downplay their market position. “We face an extremely competitive landscape in which consumers have a multitude of options to access information,” Google’s former chair Eric Schmidt once said at a US congressional hearing.
The answer can be inferred from his intended audience, and Dimon may not be addressing shareholders at all but regulators. In fact, his letter made the same point as Schmidt did in similar language: “We face extraordinary competition.” Yet rather than try to protect his company’s position from their glare, Dimon wants to focus attention on the burgeoning unregulated sector circling his business.
Other figures confirm that banks indeed lost their position as primary intermediaries of financial services. According to Federal Reserve statistics, banks now do less than half the lending in every major loan category except consumer — and even there, banks represent barely 50% of the market. In mortgages, their share of new originations is 32%, down from 91% in 2010; in leveraged lending, it is 13%, down from 46% in 2000.
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