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JPMORGAN, a very profitable giant

JPMORGAN, a very profitable giant

JPMorgan Chase is, at present, an entity focused on providing financial services, a world leader with assets exceeding $ 3.3 trillion and operations around the world. The Firm is a leader in investment banking (with broker service), financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management.

FIGURES OF A GIANT IN FINANCE

The largest banking group in the United States closed a turbulent 2020 with a net profit of 29,131 million dollars, 20% less than the previous year. In 1Q21, the result reached € 14,300 million, which means multiplying by 5 the one obtained a year ago.

The turnover or gross margin managed to rebound 4% year-on-year in 2020, to a record of $ 119,543 million, while already in the first quarter of 2021, this item improved by 14%, to $ 33,119 million.

After accumulating provisions throughout 2020, the entity finally released 2.9 billion dollars in this concept in the last quarter of last year and 5.2 billion more released from its capital reserves in 1Q21, which favored the momentum in its results figures.

By business area, investment banking stands out with the best evolution, and in 4Q20 the profit in this segment improved by 82%, + 740% in 1Q21 vs. a year ago, thanks mainly to higher bank fees and the stock market rally.

In Consumer & Community Banking, deposits grew 30% driven mainly by growth in the Federal Reserve’s balance sheet. In the Consumer business, spending continued to recover, reflected in higher combined spending on credit and debit cards throughout the quarter.

The Corporate & Investment Bank achieved an exceptional 4th quarter of 2020 with growth in Global Investment Banking commissions of 34% and Markets revenue of 20%. In 1Q21 the sales boost was 46% and + 189% in profit.

In Asset & Wealth Management, AUM grew 17% in 2020 due to higher asset values ​​and a net inflow of more than $ 190 billion in long-term and liquidity products. In 1Q21, sales in this segment grew 20.30% and profit improved 86% compared to 1Q20.

JPMORGAN, a very profitable giantJPMORGAN, a very profitable giant

JPMORGAN, a very profitable giant

SOLVENCY AND PROFITABILITY

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The CET1 ratio improves in 2020 to 13.1% and remains at this level in 1Q21 (12.4% in 2019) and capital exceeds $ 200 billion. The entity’s objective is to maintain the CET1 above 12% and the efficiency ratio in a range between 50% and 55%, from the current 54%.

Regarding profitability, ROE at the end of 1Q21 improved to 23% from 19% in the last quarter of 2020 and nothing less than from 4% in 1Q20.

FUNDAMENTAL ASSESSMENT

JP Morgan has managed to remain the leader in the national deposit market and continues as the first bank for more than 75% of clients in Consumer Banking. It has also gained a share in mortgage loans, a leader in cards, sales and debits. Regarding digitization, it maintains a global digital commitment and already reaches a digitization of 69% in Consumer Banking and 86% in Business Banking. The Group maintains a strong commitment to technology, innovation and product development: it includes blockchain efforts (Liink, JPM Coin) under a new Onyx Platform, virtual accounts (VAM), JPM client electronic wallet and global payments in real time (RTP).

In a valuation by multiples, the market pays 13v PER for JPMorgan, in line with the average of its competitors, which is around 13.7v. The PEG multiple remains at moderate levels, 0.35v, although the average for large American banks is 0.37v PEG. These slightly higher ratios than their peers are justified by the highest ROE profitability in the sector (23% at the end of 1Q21), a robust solvency ratio and a yield on Yield dividend also among the most generous (2.27% , to which must be added the buyback of shares). In a comparison by multiples, only Goldman Sachs shows a greater discount than JP Morgan.

JPMORGAN, a very profitable giantJPMORGAN, a very profitable giant

JPMORGAN, a very profitable giant

Based on fundamental analysis, the recommendation for JP Morgan stocks is positive with a view to the medium / long term.

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