“We’re Number Two. We’re Number Two!”

Right now (maybe), as we speak, JPMorgan Chase chief Jamie Dimon is celebrating (we think). That’s because Dimon’s JPMorgan Chase & Co.’s market value, $145 billion, for the first time surpassed that of his former employer Citigroup, which now weighs in at a mere $139 billion.

Both New York City banks, which historically loomed over the nation’s financial markets, are well behind Bank of America and its industry-leading $174 billion market cap.

Morgan’s grasp on the silver medal may be short lived, since Citi is still about 30 percent bigger by total assets. Assuming Citi stops hemorrhaging some day, returns on those assets will likely recover and so will the stock price.

But over the past year, Citi’s shares have been pummeled, plunging more than 50 percent thanks to the credit crunch and its own missteps. JPMorgan shares are down 18 percent.    
 
JPMorgan declined to comment on the momentous occasion. Still, it’s a key moment in the history of these archrivals. 

Back in 1998, Citi’s feuding co-CEOs John Reed and Sandy Weill found they could agree on at least one thing when they jettisoned Dimon. It was a bitter departure for the Wall Street darling, who had played an important supporting role in Weill’s rise up the corporate ladder.    

Dimon re-emerged in 2000, when he took the top job at Midwest retail banking giant Bank One. Dimon lured a platoon of Citi executives to the bank, which he turned around and then merged into JPMorgan Chase in 2004.  

He took over as CEO of the bank in January 2006, from which time its stock has advanced just 5 percent, positively ebullient compared with Citi’s 45 percent drop. 

Dimon won over investors for focusing on costs and sticking to the bank’s strengths. Citi under Weill’s chosen successor, Chuck Prince, flopped as expenses soared, businesses underperformed and critics called for a break-up. 

In the second half, Citi’s fortunes tumbled further as it absorbed more than $30 billion of losses on mortgage securities, CDOs and consumer loans. JP Morgan’s losses were far more modest: about $3 billion in the same period. 

Of course JPMorgan could pad its lead over Citi, and even overtake BofA, if Dimon finally makes a big long awaited acquisition. Dimon hinted that 2008 is the year JPMorgan would get back on offense and expand. There’s recurring speculation Dimon will snap up Atlanta-based banking and trust company SunTrust, PNC Financial’s retail banking and fund services business, or even Washington Mutual, a struggling thrift and mortgage giant.

In that case, Dimon will be taking a play that helped Weill build America’s biggest bank.

(Photo credit. (L) Charles Schwab, (R) Jamie Dimon)