Editor’s Note
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It’s Friday. Time to give you a stock pick from our sister newsletter, The Spill, so you can think about it over the weekend and maybe make a move Monday morning. While The Juice helps you be better with money across the board, The Spill focuses on stocks financial pros are researching and judges how good of buys they are. If you’re already sold, you can sign up for The Spill – for free – here. |
Why JP Morgan (JPM) IS the Best Bank Stock
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Friday kicked off the third quarter with JP Morgan Chase & Company (JPM) reporting earnings. Everyone was anxious to hear what CEO Jamie Dimon had to say about the Fed, the economy, and the consumer. He didn’t disappoint. In the company’s press release, Dimon stated: “While inflation is slowing and the U.S. economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade, and remilitarization of the world.” He also noted that deteriorating geopolitics “could have far-reaching effects on both short-term economic outcomes and, more importantly, on the course of history.” Yet, Dimon highlighted the bank’s resilience, adaptability, and preparedness for whatever may come. The bank’s results speak for themselves. Revenue grew 6% while profits fell year over year. Net interest jumped 3%, surprising many analysts. Financial pros were drawn to the report, and search volume soared before and after the announcement, according to our TrackStar data. However, many investors aren’t sure whether now is the time to jump into the stock after such an enormous run. But after reviewing the situation, we see it as a core holding for any long-term investment portfolio. Here’s why. |
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JP Morgan Chase’s Business JPMorgan Chase wields a massive $4.2 trillion in assets. The financial powerhouse offers a comprehensive suite of services, from consumer banking to investment management, setting itself apart through its vast scale and technological innovation. Operating in over 60 countries, JPMorgan Chase serves millions of U.S. consumers and many of the world’s most prominent corporate, institutional, and government clients globally. The bank’s reach extends far beyond traditional banking, encompassing areas like asset management, investment banking, and commercial lending. JPMorgan Chase segments its business into the following areas:
In its latest quarterly earnings, JPMorgan Chase reported a robust net income of $12.9 billion, demonstrating resilience in a challenging economic environment. The bank’s investment banking fees grew 31% year-over-year, while its markets revenue increased by 8%, showcasing strength across multiple business lines. JPMorgan Chase continues to invest heavily in technology, spending over $12 billion annually on digital initiatives. This focus on innovation has led to the development of cutting-edge products like Chase Digital Banking, which now boasts over 57 million active mobile users. CEO Jamie Dimon recently emphasized the need for preparedness in light of geopolitical tensions and ongoing economic challenges, underscoring the bank’s commitment to maintaining a fortress balance sheet. JPMorgan Chase’s acquisition of First Republic Bank’s assets in May 2023 has significantly boosted its growth. The acquisition’s impact is evident as Asset & Wealth Management, average loans grew 2% year-over-year, while average deposits jumped 17%, largely due to First Republic’s assets. This influx has also enhanced JPMorgan’s lending capacity and interest income. Financials
Source: Stock Analysis Outside of the two year period between 2020 and 2021, when interest rates dropped, JP Morgan has seen net interest income improve, with FY 2022 and 2023 getting a huge lift from the Fed rate hikes. Non-interest income climbed steadily as the bank expanded its services and product sales. EPS climbed as the company held SG&A to modest increases. JP Morgan currently pays a 2.3% dividend along with a similar yield for its share repurchases. That said, the company set aside higher provisions for credit losses in Q3 as it sees the potential for higher defaults even as interest rates are set to decline. Valuation
Source: Seeking Alpha JP Morgan trades at similar valuations to its peers, with Citizens Financial Group (CFG) garnering a higher P/E premium. However, JP Morgan has the highest price-to-book ratio, indicating investors are willing to pay more for its balance sheet assets per dollar than its peers. Growth
Source: Seeking Alpha JP Morgan’s revenue growth stands out both looking backward and forward. The company has also delivered higher growth in tangible book value, EPS, and total assets over the past 3-year period than most of its peers. Profitability
Source: Seeking Alpha Lastly, we can see JP Morgan’s excellent performance in its return on equity and assets, two key metrics for banks. Only Citigroup (C) boasts a higher return on assets.
Our Opinion 10/10 JP Morgan has been and still is the best bank for investors. Jamie Dimon is a once-in-a-generation CEO who has guided the company through booms and busts. He knows when and how to take advantage of opportunities. Until he retires, JP Morgan should remain a part of every investor’s portfolio. |
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Proprietary Data Insights Financial Pros’ Top Banking Stock Searches in the Last Month
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