Market value: $279.3 billion
Dividend yield: 4.0%
JPMorgan Chase (JPM, $89.05), with $3.1 trillion in assets, is the nation’s largest consumer lender. The company also is largest among publicly traded U.S. bank stocks, the world’s largest investment bank, No. 1 in the U.S. based on credit card volume and multifamily mortgage lending, and also a mutual fund manager. The bank serves nearly 63 million U.S. households, including 4 million small businesses.
JPMorgan grew core loans 2% last year to $958.8 billion, increased overall deposits 5% to $1.56 trillion and broadened its market share while maintaining strong expense discipline. Its 55% expense ratio compares favorably to peer levels (57% to 73%), and its 19% return on common tangible equity (ROTCE) was 4 percentage points higher than the next highest competitor, Bank of America (BAC).
This lending giant has delivered record revenues and net income nine times in the past 10 years and entered 2020 from a position of exceptional financial strength and liquidity, as evidenced by its Tier 1 capital ratio of 12.4%, which is well above the 9.0% regulatory minimum. (The Tier 1 capital ratio measures the bank’s risk-adjusted assets versus equity and is a key measure of liquidity.) JPM has improved its payout for nine years in a row, and its payout ratio is a conservative 40% of profits … though that number jumps to about 74% based on analysts’ expectations for this year’s coronavirus-hit profits.
JPMorgan Chase is already better prepared than most lenders to grow during a recession; internal stress tests indicate that JPM would be able to increase lending even if GDP drops by 35% this year. That hasn’t stopped investors from selling JPM shares off by 35% since the bull-market high, of course. A lack of financial activity and extraordinarily low interest rates were among the various factors working against JPMorgan in Q1 as it posted just 78 cents per share in earnings – less than half of what analysts expected.
Nonetheless, Keefe, Bruyette and Woods analyst Brian Kleinhanzl thinks JPMorgan Chase will be a standout in the event of a recession. In fact, he even upgraded JPMorgan Chase to Outperform (equivalent of Buy) in early April.
SBA loans are a small component of JPMorgan’s diversified business. But the bank was the seventh-largest SBA lender overall last year, and doling out these waves of loans should provide a small boost to its operations.
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