Financials & Banks
NIM, CET1, tangible book value, loan loss provisions, and why bank accounting is fundamentally different
JPMorgan Chase ended 2024 with $4.0 trillion in assets and $345 billion in stockholders' equity. That's roughly 11.
6:1 leverage — for every dollar of shareholder capital, the bank has $11.60 in assets funded by deposits and debt. No technology company, no retailer, no manufacturer operates at anything close to this leverage.
It means a 9% decline in asset values wipes out all equity. It means bank profitability is measured in basis points, not percentage points. It means traditional metrics like P/E and EV/EBITDA miss the point entirely.
Banking is the only major industry where the raw materials (deposits), the product (loans), and the risk (credit losses) are all the same thing: money. This lesson teaches you to read banks the way bank analysts do. A bank's core business is simple: borrow money cheaply (deposits, wholesale funding) and lend it at a higher rate (mortgages, corporate loans, credit cards).
That is the opening. Finishing a lesson is where it stops being interesting and starts being useful: the full lesson runs to 6 sections and ends with 5 practice questions. A free account is what opens the rest, and the other 255 lessons in the Academy with it. No card.
What this lesson covers
- 1Net Interest Margin: the bank's gross margin equivalent
- 2NIM and the leverage amplifier
- 3CET1: the capital buffer that prevents death
- 4JPMorgan Chase FY2024: reading the bank scorecard
- 5Tangible Book Value: the floor valuation for banks
- 6Loan Loss Provisions: the earnings volatility bomb