JP Morgan Chase & Co. Company Analysis

Company Background:

• JP Morgan Chase & Co. (NYSE: JPM) is one of the oldest financial institutions in the United States. It was originally founded by a banker named J. Pierpont Morgan in 1871. Historically speaking, this bank surprisingly played a prominent role in the creation of the U.S. Federal Reserve System in 1913.
• JP Morgan is headquartered in New York City, specifically at 383 Madison Avenue. As of today, this institution operates in over 100 countries with more than 240,000 employees worldwide.
• Astonishingly, JPMorgan Chase has $3.7 trillion in assets and $303 billion in stockholders’ equity as of March 31, 2023. This makes JP Morgan Chase the largest bank in the United States in terms of assets under management.
• “Asset management is the practice of increasing total wealth over time by acquiring, maintaining, and trading investments that have the potential to grow in value.” — Investopedia.
• J.P. Morgan & Co. merged with Chase Manhattan Corporation in 2000 to form JPMorgan Chase & Co. The merger was completed on December 31, 2000. The ticker symbol, which was JPM, still hadn’t changed after the merger to preserve the company’s history.

Market Capitalization:

US$458.54 Billion (Equivalent to BDT৳ 49,774.99 Billion or 615 Singaporean Dollars.)

Additionally, to put the market cap of JP Morgan Chase into perspective, it’s higher than the GDP of both Bangladesh (US$416 Billion) and Singapore (US$397 Billion).

Mission Statement: “Our mission is to be the best financial services company in the world.”

Summary of the Country That JP Morgan Operates in + Effect On Interest Rates:

JP Morgan, as explained in the company background, is principally located in the United States of America. The US banking system is the backbone of the country’s economy and consists of the Federal Reserve and commercial and investment banks. Throughout its time operating in the United States, JP Morgan has witnessed several banking collapses, such as those in 1929 and 2008, as well as during peak interest rates in 1980, which reached a staggering 20%. Despite these challenges, JP Morgan has managed to survive and remains a prominent institution to this day. The US Federal Reserve utilizes interest rate adjustments as a tool to control inflation, raising or lowering rates as needed. However, with prudent management practices and a substantial portfolio of assets under their management, JP Morgan is well-positioned to continue its existence perpetually.

Summary On Competitors: JP Morgan, just like many other financial firms, has many competitors that fight for supremacy in the financial industry. Some of these are top banks around the world, such as Bank of America, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley, and HSBC.

Here is a detailed comparison between JP Morgan Chase and its banking competitors:

JP Morgan V.S. S&P 500 Performance:

Financial Statements Analysis:

BALANCE SHEET

INCOME STATEMENT

CASH FLOW

Major Takeaways:

• For this quarter, JP Morgan Chase had a total net revenue of US$4.24 Billion, which is an astounding 7.79% growth from the previous quarter.CCJ
• The earnings per share (EPS) is US$4.76, which is also a growth of 15.82% from the previous quarter.
• The return on equity (ROE) for the current quarter stands at 20%, indicating a 2% increase from the previous quarter’s rate of 18%.
• The operating cash flow for the trailing 12 months is US$107 million which is a remarkable growth of 37.18% from last year. This is indicative of the fact that JP Morgan Chase is generating more cash after excluding all its expenses.
• The return on assets this quarter is 1.51 which is a 9.42% growth from the last quarter. From an investing perspective, this indicates that JP Morgan Chase is effectively utilizing its assets to generate more profit for the investors.
• The loan to deposits ratio is 54% which is much lower than the banking industry average of 63.6%. When evaluating the loan-to-deposits ratio, a lower value is not necessarily a negative indicator; in fact, it can be considered a positive attribute.
• One potential area for concern while looking at the long-term debt in the balance sheet is US$3.64 Billion, which is the largest so far this trailing 12 months. However, as investors, we don’t consider this issue to be particularly serious, primarily because JP Morgan’s loan-to-deposits ratio is better than 54%. Moreover, the increased borrowing of long-term loans was likely undertaken to reduce liquidity risks and to enhance the percentage of the net interest income.

Assessing Its Financial Strengths Using Different Metrics:

• Return on equity (ROE) = 20% → (Source: Link)
• Net Interest Income (NII) = 44% → (Source: Link)
• Return on investment (ROI) = 9.64% → (Source: Link)
• Return on assets (ROA) = 1.22% → (Source: Link)
• Dividend yield = 2.56% → (Source: Link)
• P/E Ratio = 10.1 → (Source: Link)
• Debt-To-Equity Ratio = 1.28 → (Source: Link)
• Interest Coverage = 2.45 → (Source: Link)
• Gross profit margin = 23.4% → (Source: Link)
• Book value = 1.611 → (Source: Link)

Table of financial ratios of JP Morgan Chase vs. S&P 500 (benchmark):

Annualized average of revenue, ROE, ROA, and dividend yield of JP Morgan Chase for the past 3 years:

Annualized average of revenue, ROE, ROA, and dividend yield of JP Morgan Chase for the past 3 years:

Forecast of the aforementioned annualized ratios for the next year:

Final Verdict:

We believe that JP Morgan’s financial performance has been good over the decade but now better than ever. Their market capitalization has consistently been growing at 6% per year, with its current market capitalization at US$458.54 Billion (Equivalent to BDT৳ 49,774.99 Billion or 615 Singaporean Dollars.) This is higher than the GDP of both Bangladesh (US 416 Billion) and Singapore (US$397 Billion).

Additionally, JP Morgan’s Operating Income has increased dramatically in recent years, with a 23% increase from the previous year. We can also see that JP Morgan has a low debt-to-equity ratio at 1.28 compared to its competitors, such as Goldman Sachs, making it a much better buy. Lastly, the P.E ratio of JP Morgan is 10.16, which is much below the S&P 500 P.E ratio at 26.47, making it very undervalued, which makes it a good buy as the price will go up in the future.

Given JP Morgan’s consistently strong financial performance, impressive market capitalization surpassing the GDP of entire nations, a significant increase in operating income, low debt-to-equity ratio, and undervalued P.E. ratio compared to the S&P 500, it presents an attractive investment opportunity.

Buying JP Morgan stock could prove to be a lucrative decision as the company’s promising outlook indicates potential for further growth and a higher stock price in the future.