When it comes to the possibility of a recession, some US bank executives are being more than transparent. The biggest lenders would not only survive even a savage economic downturn, they could come out of it stronger.

Bank bosses talk openly of a coming crisis, but they don’t seem to fear it. Citigroup’s Jane Fraser said in July that banks depend on capital, liquidity, credit quality and reserves in a recession, and that she feels “very good about all four.” JP Morgan boss Jamie Dimon has warned of an economic “hurricane,” and a few weeks ago he told clients there could be more than a 40% chance of a harsh recession or even “something worse.” However, he also boasted in July that even when Lehman Brothers collapsed in 2008, his company remained profitable.

It is not arrogance. The big banks are better prepared for a difficult situation than they were before the last big financial crisis. It’s not entirely by choice: The Fed forces banks to hold enough capital to soak up colossal amounts of red ink. JP Morgan, for example, must be prepared to lose $41 billion. From 2020, banks also have to preemptively take charges against today’s profits to cover estimated future bad debts. It’s something they hate, but it gives them even more cushion.

Dimon and his colleagues have also done some economic selection in recent years. Risky second home mortgages and leveraged loans are no longer in vogue; the so-called preferred customers, yes. Under Brian Moynihan, Bank of America has cut its mortgage lending by about $130 billion since 2009, while lending an equal amount to clients of its investment and wealth management division. In addition, banks have bolstered their liquidity, the lifeblood of a bank when markets roil. At the end of June, Bank of America and Citi had nearly $1 trillion in cash each, as well as investments that could easily be converted into cash.

It is one thing to say that big banks can survive a recession. What is less talked about is the idea that they can benefit. Some of its businesses are less exposed to the direction of the economy: mergers can slow down in tough times, but trading desks tend to do well when markets are volatile, both down and up.

More importantly, a recession is likely to hit hardest on the young tech firms that are proving to be the most troublesome source of competition for banks. Most digital banks and services buy now pay later they have not yet experienced a recession. Many need fresh capital, which is harder to come by as the economic outlook deteriorates.

Also, as Dimon points out, in a recession “certain things get cheaper.” Among them, the staff, whose remuneration is already falling considerably taking into account inflation. A tightening in the job market could also help Wall Street firms looking to hire tech experts who can help develop their digital products and technology behind the scenes. As big tech companies like Microsoft and Meta lay off staff, banks are becoming more attractive employers.

Potential takeover targets are also getting cheaper: Shares in Robinhood, which competes with JP Morgan and Morgan Stanley, are down nearly 50% this year. Unlisted payments firm Stripe has slashed its internal valuation by 28%, the WSJ reported in July. Cash-laden banks may find an opportunity to jump into the market.

Regardless of whether the recession is long, short, hard, soft or non-existent, banks have already suffered in price. Shares of the majors are trading 20% ​​below the price targets set by analysts, according to Morningstar. Although analysts tend to be overly optimistic, so there is often a small difference between their targets and the actual price, the discount is now more than half of the 40% it reached during the March 2020 recession. high, in 2008, it was 60%.

According to another indicator, investors are already being too hard. Bank stocks tend to track the yield on 10-year US Treasuries, a broad reflection of the fact that when long-term rates rise, banks make more money. That relationship has been inverted for much of 2022. PNC Bank CEO Bill Demchak told analysts in July that falling valuations are “simply wrong” even in the worst case scenario, adding that a slowdown would help banks recover some classes of business that had gone elsewhere.

What is clear is that in a few years, the big banks like JP Morgan will still be around, while some of their more aggressive new rivals will not. And the US economy will most likely recover from any recession. So while a recession can be brutal for customers, employees and citizens in general, for banks it could be a gift in disguise.