It’s been said that there are more banks than bankers; something that seemed to have been proven true during the financial crisis. Fortunately, Jamie Dimon, the CEO and Chairman of J.P. Morgan Chase, has proven to be one of the great bankers of our generation. After steering J.P. Morgan through the turmoil of the financial crisis Jamie Dimon has secured his bank's position as the largest bank in the United States. With over 256,000 employees and 5,036 branches J.P. Morgan is aiming to have over 93% of the U.S. population within their footprint over the coming years.
Like all big banks J.P. Morgan derives their revenue from multiple different segments and due to changes in regulation over the past few decades they have been able to expand into different areas of operation such as investment banking services. Still, their primary source of revenue comes from their Consumer & Community Banking which offers services such as mortgage lending, personal banking, and credit card issuing and brought in total revenue of $52.1 billion dollars and just under $15 billion in net income in 2018.
Their second largest segment consists of Corporate and Investment Banking solutions such as capital raising in both debt and equity markets, securities trading, as well as advising on mergers and acquisitions. In 2018 their Corporate and Investment banking segment brought in total revenue of $36.4 billion and net income of $11.8 billion, giving this segment a 32% profit margin.
Following the Corporate and Investment Banking segment is their Asset and Wealth Management division which offers investment services to clients as well as creates and manages different financial products sold to both retail and institutional investors. In 2018 J.P. Morgan brought in $14.1 billion in revenue from their Asset and Wealth Management segment ending with $2.9 billion in net income.
Commercial banking remains their smallest segment with $9.1 billion in revenue and $4.2 billion in net income. However, J.P. Morgan continues to make advancements in this segment and in 2018 they added 67 new locations as well as 650 new bankers to help in their offerings of Commercial Banking services which include lending and asset management for corporations, municipalities, financial institutions and other entities.
More important than the profits recorded by each segment are the returns on equity (ROE) brought in by each division which J.P. Morgan clearly lays out in their annual report as follows:
Consumer & Community Banking = 28% ROE
Corporate & Investment Banking = 16% ROE
Commercial Banking = 20% ROE
Asset & Wealth Management = 31% ROE
Overall J.P. Morgan ended 2018 with revenue of $109.9 billion, net income of $32.4 billion and a return on equity of 14%. From 2014 to 2018 they grew their earnings from $21.7 billion to $32.4 billion all the while improving the balance sheet and returning billions to shareholders. While a similar growth rate into the future is very unlikely one would have no problem valuing the bank at just over $500 billion. This valuation however, is based on assumptions of J.P. Morgan’s growth, market share, competitive position, and a number of other important factors deemed essential by Olympus Wealth Management, and further explained in Guide to Olympus Insights. One should take into careful consideration the key figures represented below as well as markets factors that may alter the growth of the company before making any sort of investment decision.
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Please note: Olympus Wealth Management is a Tulsa based investment fund which may or may not own holdings in J.P. Morgan Chase & Co. and the reader should not take the above article as a recommendation to buy or sell J.P. Morgan’s stock but instead as an informative article meant to increase one’s knowledge of the company.