JP Morgan Chase & Co - Stocks

Instrument description

Banks have played a key and central role in the development and expansion of the economy. JPMorgan Chase is one of the most revered and popular banks not only in the US but also in the world. In the US, JPMorgan Chase is nicknamed ‘Big Bank’ and regarded as the oldest, largest, and efficient financial institution with clients and customers spread across 60 countries of the world. JPMorgan Chase serves everyone from the common individual to business clients to big corporations to rich investors and government enterprises.

JPMorgan Chase is based in Manhattan, New York, and the company excels in commercial banking, prime brokerage, financial services, asset management, financial transaction, and private equity. JPMorgan Chase operates both bank and non-bank subsidiaries in the US and the international countries.

The main JPMorgan Chase Bank, National Association, has branches in more the 23 states of the US. The JPMorgan Securities LLC deals with investment banking and Chase Bank USA, National Association manages issuing of credit cards.

In 2016, JPMorgan Chase had a net income of $22.6 billion, which was by far the largest by any other bank in the US. Also, in 2019, the asset management division JPMorgan Chase posted $2.8 trillion, and the investment unit held $25.45 trillion. JPMorgan Chase also has the third-largest hedge fund in the world, with $45 billion in assets.

JPMorgan Chase is included in the list of ‘Big Four’ banks of America that also has Citi Group, Bank of America, and Wells Fargo. JPMorgan Chase is the 7yh largest bank in the world based on total assets of $2.68 trillion, and it has 257000 employees. In 2019, Fortune 500 ranked 18 in the list of largest US corporations according to total revenue.

History of JPMorgan Chase

JPMorgan Chase traces its root right back to its oldest predecessor, which was Bank of the Manhattan Company, which was formed on September 1, 1799. Then several banking firms became a part of the company that included Chemical Bank, First Chicago Bank, and Manufacturers Hanover.

The current company is the due to combination of several banking companies since 1996 that includes JPMorgan & Co., Chase Manhattan Bank, Bear Streams, Bank One, and Washington Mutual.

However, the current structure of the bank is due to the merger of two financial institutions ‘J.P Morgan’ and ‘Chase Manhattan’ that happened in 2000. Under the JPMorgan Chase name

• JPMorgan serves to individuals and investors and offers investment banking, treasury services, private banking, wealth and asset management, and brokerage
• Chase serves most of the customers by providing them commercial banking, mortgage, credit cards, retail banking, investment advice, small business loans, auto financing, and payment processing services.

A merchant bank is opened in London in 1838 by George Peabody, and Junius Spencer Morgan takes interest and became a shared partner in the bank and quickly takes management of the bank. It was in 1861 when Junius’s son John Pierpont Morgan opened an office in New York called it ‘JP Morgan and Co. In 1864, Junius also renamed the merchant bank opened in London to JS Morgan and Co.

The Chase National Bank is founded in 1877 and in 1895, JP Morgan combines his father’s business and renames the new firm as ‘JP Morgan and Co.’ The Chase Bank buys John D. Rockefeller’s Equitable Trust Company in 1930, and in 1933, the Glass-Steagall is passed that separated the commercial banking and investment activities of the bank.

Subsequently, after passing of the Glass-Steagall Act, JP Morgan makes a separate unit for investment banking called it ‘Morgan Stanley.’ In 1955, the Chase National and the Bank of Manhattan combined to form Chase Manhattan Bank. In 1969, both JP Morgan & Co and Chase Manhattan Corporation were turned into a big bank banking and financial holding company.

In 1989, JP Morgan resumed the investment banking activities after getting permission from the Federal Reserve. In 1991, Chemical Bank merged with Manufacturers Hanover to form Chemical Banking Corporation. In 1996, the Chemical Banking Corporation bought Chase Manhattan. In 1997, J.P Morgan put a 45% investment in American Century Investments.

In 2000, Chase Bank combined with JP Morgan to make JP Morgan Chase & Co. In 2004, JPMorgan Chase merged with Bank One Corporation and acquired Bear Streams in March 2008. JPMorgan Chase acquired most of the banking operations of Washington Mutual in September 2008. JPMorgan Chase made several acquisitions since its merger, and some of the notable ones are acquiring.

• Collegiate Funding Services in 2006
• Bank of New York Mellon also in 2006
• A UK based company, ClimateCare in 2008
• Bloomspot is 2013 for $35 million

Current Business and Investment of JPMorgan Chase

JPMorgan Chase is a big holding company that offers a wide range of financial services and solutions. The four segments that the company functions in are

• Corporate and Investment Banking

It consists of Banking, Market, and Investor services and includes investment banking, prime brokerage, securities products, market making, and treasury services to business companies, financial institutions, investors, and government enterprises.

• Consumer and Community Banking

This segment offers financial products and services to customers and businesses through numerous branches of the bank, ATMs (Automatic Teller Machine), telephone banking, online and mobile banking.

• Commercial Banking

It offers numerous financial services and solutions that include lending, investment options, and treasury services.

• Asset Management

This segment comprises of wealth and investment management.

Risk and Potential in JPMorgan Chase Environment

JPMorgan Chase is the biggest financial institution in the US and provides leading financial services all across the world. JPMorgan Chase is recognized as the oldest company in the banking sector and known to be financially strong and stable. The company is known for its exceptional banking services to its clients and customers. SWOT analysis is a technique that allows JPMorgan Chase to analyze its current market performance and form a pertinent strategy for the future. The SWOT analysis of JPMorgan Chase is given by

• Strengths

JPMorgan Chase is a prominent name in the banking and financial sector and deals with numerous customers, clients, and businesses in over 60 countries. The company sets a benchmark in commercial and investment banking along with asset management. JPMorgan Chase is financially very stable when it comes to total revenue, market capitalization, net income, and assets. The company has over 250,000 employees and offers a diversified portfolio of services.

• Weaknesses

JPMorgan Chase has its business expanded to all parts of the world, but the company relies heavily on revenue generation from the US. There are many big local and international banks that give tough competition to JPMorgan Chase and claim a large portion of the market share. The market fluctuations occur frequently and cause instability. The company’s business is spread over 60 countries, and there are more than 250,000 employees that increases the operational expense.

• Opportunities

JPMorgan Chase has the opportunity to grow further by expanding into emerging economies of Asia and Africa and offering diversified portfolio for customers. The asset management segment has grown tremendously over the years and expected to reach $102 trillion in 2020, and the company can benefit from this success. JPMorgan Chase can also increase its credit card circulation.

• Threats

JPMorgan Chase faces a threat from the constantly changing economic situation in the world and government regulations. The financial crisis, such as recessions, impact the business of the bank. The company also has to pay an increasing amount on compliance and deal with the unstable mortgage market. The competitors of JPMorgan Chase include Bank of America, Wells Fargo, ING Group, Citi Group, HSBC, and Goldman Sachs.

Stock Analysis of JPMorgan Chase

JPMorgan Chase is listed and actively trades on the New York Stock Exchange (NYSE) with the ticker symbols ‘JPM.’ The company is listed under the ‘Finance’ Sector, and the industry is ‘Major Banks.’ JPMorgan Chase is also a member of other indices such as the Dow Jones Industrial Average (DJIA), London Stock Exchange (LSE), S&P-100 Index, and S&P-500 Index.

The all-time high share price of JPMorgan Chase was $141.09 on January 2, 2020, and the average price in the last 52 weeks is $112.63.

Coronavirus pandemic has badly affected the global economy, including every industry and sector of the market. The banking sector has suffered immensely with the Covid-19 breakout as businesses are closed, and people are compelled to stay at home. Investors, on the other hand, are closely monitoring the situation and investing in technology firms instead of banks and other financial institutions.

The Earnings per Share (EPS) of JPMorgan Chase fell for the first time in eight quarters, as the EPS declined 71% in the first quarter of 2020, and 51% in the second quarter of 2020. The net incomes declined at 4% to close at $14 billion. The stock value of JPMorgan Chase surged 19% in 2019, but analysts predict that earnings will fall 46% till 2020.

In June 2020, the Federal Reserve Bank asked the major banks to cap the dividends and stop the stock buybacks for the third quarter. The banks prosper when the markets are active, and the economy is growing, but the Coronavirus pandemic is by and large not controlled, and the cases are rising due to which the businesses have not resumed properly. JPMorgan Chase has a massive market value of $313 billion, but the total economic impact of Coronavirus is not properly estimated, and the near-zero interest rates by Fed are also impacting the business of the bank. The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.