In Q3 2024, JPMorgan reported total revenues of $42.7 billion, a 7% increase compared to the same period last year. This growth was largely driven by the company's commercial and investment banking segment, led by higher investment banking fees and a solid performance in its Markets & Securities Services division.
Below are key drivers of JPMorgan's value that present opportunities for upside or downside to the current Trefis price estimate for the banking group:
JPMorgan Chase is a diversified financial services institution with operations worldwide. The largest bank in the U.S. in terms of total assets, JPMorgan is a leader in providing credit & debit cards and mortgages as well as investment banking, wealth management, and sales & trading services. Through its various business segments, JPMorgan serves millions of customers in the U.S. and many of the world's most prominent corporate, institutional, and government clients across the globe.
JPMorgan is a market leader in nearly every financial service, including retail banking, commercial banking, investment banking, and custody banking. This diversified business model allows the bank to provide its individual and institutional customers with a broader range of services. Moreover, the business model also brings significant cross-selling opportunities that are not readily available to its competitors.
JPMorgan's investment banking division - and the Sales & Trading unit in particular - has historically had strong operating margins compared to other divisions in the firm. The bank's position as the largest player in the global FICC trading industry has also helped it achieve considerable economies of scale compared to competitors.
Increased regulation of the financial industry is expected to reduce the top line for most financial institutions. In the past, decreased regulation led to greater risk-taking for many parts of the businesses, which drove earnings growth. Stricter regulation has affected the banking industry in several ways:
JPMorgan has a strong liquidity and capital position across its businesses.
JPMorgan Chase has done well over recent years to reduce non-interest expenses as a percentage of its revenues from around 65% in 2011-15 to just 58-60% in 2016-22. The bank has also worked hard to cut overhead costs to improve its profit margins.
Past acquisitions, most notably those of Bear Stearns and Washington Mutual, have helped increase the investment banking and retail banking business for JPMorgan.
JPMorgan competes with Bank of America and Wells Fargo, mostly in the retail banking business. It currently has more than 5,000 branches across the country.
JPMorgan holds a strong position in the global investment banking space. According to Thomson Reuters, it earned the most global advisory, debt origination, and equity & equity-related underwriting fees for each of the last four years.
As a result of the financial crisis, the banking industry saw a period of mergers and consolidation. The financial crisis has seen nearly 15-20% of the market share change hands. The banking industry continues to see consolidation in almost every business aspect as players try to globalize and seek scale. Due to uncertainty, customers are also increasingly becoming more risk-averse and turning to larger players with stronger deposit bases. The number of operating commercial banks was around 4,787 in 2022.
