JP Morgan Chase is Poised To Grow Your Portfolio

JPM - JPMorgan Chase

JP Morgan Chase is a leading global financial services firm with assets worth $2.6 trillion and a presence in over 100 markets. It is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management. JPM is one of the largest banking institutions in the USA. The firm serves millions of consumers, small businesses, corporate, institutional and government clients.

JP Morgan’s business can be divided into four lines:

  • Consumer and community banking,
  • Corporate and investment banking,
  • Commercial Banking, and
  • Asset & Wealth Management.

Its CCB business serves 62 million U.S. households, including 4 million small businesses while its CIB business has a presence in over 100 markets. Major asset classes include liquidity (24% of total AUM), fixed income (24%), equity (19%), and multi-asset and alternatives (33%). Besides North America, JPM’s key markets include EMEA, Asia-Pacific and Latin America and Caribbean regions.

Investment Data

Revenue Growth & Market Exposure

JP Morgan ranks No.1 in U.S. retail deposit growth. Its corporate & investment banking arm does business with more than 80% of Fortune 500 companies and has a presence in over 100 markets globally. JP Morgan ranked No.1 in investment banking for the past decade and finished 2018 with 8.7% of global wallet share and strong potential for future growth. Its Treasury Services business is also demonstrating robust growth. Its wealth management business continues to grow with 47 index funds and ETFs added over the last three years.

JP Morgan continues to invest in products, services, and technology. The bank has a strong online presence and is the top most visited banking portal in the U.S. with 49 million active digital customers and 33 million active mobile customers. Customers can now open a new deposit account digitally in three to five minutes. This has added approximately 1.5 million new accounts since its launch in February 2018. Since launching its Middle Market expansion efforts, JP Morgan now has a presence in 39 new markets and has added 2,800 clients, resulting in 22% compounded revenue growth over the last three years.

It started a new digital investing platform: You Invest; and launched a partnership with Amazon and Berkshire Hathaway in healthcare. It also extended its presence in several states with new Chase branches and has plans to open another 400 new branches in the next few years. JP Morgan is well positioned for organic growth opportunities across its lines of business.

Dividends

JP Morgan has a history of delivering strong capital returns to shareholders. JP Morgan is a Dividend Starter. The bank has an annual average yield of 2.6%. It last raised its dividend by 12.5%. JP Morgan’s dividend also looks stable with a low payout ratio of 33%. Its dividend growth has been impressive, growing at a rate of more than 13% CAGR in the last three years. The bank’s EPS has also grown at a rate of 14% CAGR during the same time. The bank has bought back almost $55 billion in stock or nearly 660 million shares, in the last five years.

Chase has maintained its CET1 ratio at near 12%, and management is targeting a CET1 ratio in a conservative range of 11% to 12% going forward.

Chase’s retail branch footprint expansion amplifies its opportunity to deepen relationships with clients. The bank is targeting more than 90% of the U.S. population come under its footprint as it expands its branch network to new markets with an integrated physical and digital approach. It is also expanding its footprint to capture more of the opportunity across the U.S. wealth management spectrum.

The bank has ample opportunities in every customer segment from the middle market and small businesses to large corporate clients and their business outside of the U.S. Strong and adequately diversified earnings and margins, and a fortress balance sheet should support future dividend growth.

Competition

JP Morgan’s exceptional client franchises and proven operating model act as strong competitive advantages. The firm competes with the likes of Well Fargo & Company, an industry-leading diversified, financial services company providing banking, insurance, investments, mortgage, and consumer and commercial finance.

Bottom Line

JP Morgan is a key player in global investment banking, credit card issuances, and wealth management and continues to gain market share in most of its business segments. The bank is well positioned to increase its client base and also cross-sell to existing clients, given its large retail and digital footprint. A low-cost structure, strong balance sheet, leading market share position, and impressive earnings growth should support its dividend growth streak in the future.

With the financial crisis of 2009 in the rear-view mirror, JP Morgan Chase has been able to focus on growing the business and improving the top and bottom line which servers investors well. 

JPM vs Indexes

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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