Big Four U.S. Banks Dominate Profits Amidst Industry Shakeup and Non-Bank Competition

Recently, there has been an increased focus on the dominant role of the largest U.S. banks in the financial industry. According to data from the industry tracker BankRegData, the four largest banks by deposits and assets — JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo — have collectively reported approximately $880 billion in profits for the first nine months of 2024. This marks a significant milestone as these banks now account for 44% of the overall profits in the U.S. banking sector, their highest share in nearly a decade.

The profitability and the sheer scale of the largest banks underscore the significant disparities within the banking industry. This concentration indicates that size and scale have become increasingly important, allowing major banks to distribute regulatory, technological, marketing, and operational costs across a more extensive client base. Consequently, the dominance of these banks is challenging for smaller institutions to match in terms of investment and brand visibility.

The structural dynamics within the banking sector have prompted calls for further consolidation among smaller banks. Some industry experts predict significant reductions in the number of banks, foreseeing potential mergers to enhance competitive positioning. This trend might align with historical patterns of deregulation and consolidation following the easing of interstate banking restrictions in the 1980s.

However, the competitive landscape for traditional banks is also evolving due to the rise of non-bank financial institutions. Entities like Apollo, Affirm, and Rocket Mortgage are increasingly significant players in providing credit to businesses, homeowners, and consumers. In particular, non-bank firms now manage over half of the residential mortgage market in the U.S., a dramatic increase from just 11% in 2011.

These developments reflect a shifting paradigm in the financial services industry, where large banks continue to consolidate their dominance. At the same time, they face mounting challenges from innovative non-bank firms offering similar services, thus reshaping the competitive contours of the sector.