With its legacy dating back over 200 years, JPMorgan Chase & Co. is one of the oldest, largest and well-known financial institutions in the U.S. It has operations in over 60 countries, with millions of customers in the form of individuals, small businesses, institutions, government establishments and prominent corporate houses. JPMorgan Chase is one of the constituents of the Dow Jones Industrial Average and trades on the New York Stock Exchange (NYSE) under the ticker JPM. The company currently has a market capitalization of $224.9 billion

Business

JPMorgan Chase operates through four reportable business segments: 1) Consumer and Community Banking, 2) Corporate and Investment Bank, 3) Commercial Banking and 4) Asset Management. Based on its 2014 annual report, Consumer and Community Banking and Corporate and Investment Bank generated 45% and 35%, respectively, of the overall revenue of JPMorgan Chase while Commercial Banking and Asset Management contributed 7% and 12%, respectively, towards the total revenue. The firm also has a fifth segment – corporate – which is minuscule at present. 

According to JPMorgan Chase's annual report, “our mix of businesses leads to effective cross sell and substantial competitive advantages. We are not a conglomerate of separate unrelated businesses – we are an operating company providing financial services to customers, companies and communities."

Financials

JPMorgan Chase reported a net income of $21.8 billion for fiscal-year 2014, an increase of almost 22% year-on-year. Its consumer and community banking segment generated 42% of the total net income while the corporate and investment bank segment contributed a significant 32%. The remaining three business segments – commercial banking, asset management and corporate - made a contribution of 12%, 10% and 4%, respectively. During the current fiscal year, its net income for the first quarter was $5.9 billion, while it was $6.3 billion for the second quarter. 

The firm reported revenue of $91.07 billion for the 2014 fiscal year, down 5.5% year-on-year. During the current fiscal year, revenues for the first and second quarter were reported at $24.82 billion and $24.53 billion, respectively. 

The firm’s earnings per share (EPS) improved in 2014 to $5.29 vis-à-vis $4.25 in 2013. JPMorgan Chase’s EPS for the first and second quarters of the current fiscal year were $1.45 and $1.54, respectively. The positive earnings trend is likely to continue going forward.

Peers & Stock Movement

Although JP Morgan Chase faces stiff competition from the wide of array banking institutions in the U.S. and globally, it continues to command market share and remains the biggest bank in terms of consolidated assets, according to Federal Reserve statistics. According to statistics released in August 2015, JPMorgan Chase had assets worth $2.10 trillion, compared to those of Bank of America Corporation (BAC) at $1.6 trillion, Wells Fargo and Co. with $1.57 trillion  (WFC) and Citigroup Inc. (C), with $1.34 trillion. Other banks on the top ten list were US Bancorp (USB), PNC Financial Services Group Inc. (PNC), Bank of New York Mellon Corp. (BK), State Street Corp. (STT), Capital One Financial Corp. (COF) and the Toronto-Dominion Bank (TD). (Related reading, see: JP Morgan Chase & Co. Vs. Bank of America Stock.)

The financial crisis of 2008-09 was a test for U.S. financial institutions, which JPMorgan Chase was able to endure better than peers like Citigroup, Wells Fargo, Bank of America and US Bancorp. The graph above shows the movement of these stocks together for the period starting January 2007 through August 31, 2015. The maximum dip was seen in the stocks of Citigroup and Bank of America while Wells Fargo, US Bancorp and JPMorgan Chase were able to limit the fall to some extent. The latter three have also had a stronger and faster recovery period compared to Bank of America and Citigroup. 

The stock of JPMorgan Chase was up by 21.69% during 2006, while it fell by 9.63% and 27.77% in 2007 and 2008 respectively. The year 2009 witnessed the stock rebound with 32.16% returns, while returns were flattened at 1.8% in 2010. The year 2011 wasn’t a happy one for JP Morgan Chase, as its stock fell by 21.62%. However it sprang up again with 32.24% and 33% returns in 2012 and 2013, respectively, and it closed 2014 at $62.58, posting a 7.01% return for the year. In 2015, the stock is down 1.77% YTD (as of September 27, 2015). 

The Bottom Line

JPMorgan Chase’s earnings per share, rising net income and comfortable operating cash flow, dividend payments, solid assets and sound stock price movement make it a good buy from the US financial sector. Based on the quarterly results, analysts project the bank’s earnings per share at $5.86 for 2015, $6.46 for 2016 and $7.26 for 2017. (Related reading, see: JPMorgan Chase: Too Big (And Profitable) To Fail.)

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