JPMorgan Chase & Co

  • JP Morgan Chase is an American investment   bank and financial services holding company with an extensive global   footprint operating in more than 100 countries. It reported a robust set of   results for the first quarter 2021, on the back of a major turnaround in the   US economy which is recovering from the Covid pandemic and associated   lockdowns.

  • Profits soared following   the release of billions of dollar of reserves. These were previously set   aside in anticipation of substantial bad loan write-offs which did not   materialize due booming markets and the economic recovery. This enabled the   group to free up $5.2 bn in capital.

  • The group reported a   record quarterly profit of $14.3bn, or EPS of $4.50, which was above   analysts’ forecasts. Revenue rose 14% to $32.2 bn from the previous years’   quarter.

  • The jewel in the crown   was powered by the soaring contribution of the investment and corporate   division which saw revenues escalate by 46% to $14.6bn. It saw sharp   increases in trading revenues (by 25%), and investment fees (by 57%), thanks   to strong prevailing market conditions bought about by an injection of   liquidity by the FED and US Government.

  • The Chase division is   the retail and commercial arm of the group, which has been expanding its US   footprint operating in 48 states in the USA and has shown a more mundane set   of results due to low demand for credit, by both consumers and businesses.   They have been reticent to spend, having been though the uncertainties of a   recession in the past year, preferring to save funds where possible.

  • US banks have strong   balance sheets with robust deposit growth enabling the banking sector to   increase lending. This should be a positive into the second half of the year,   and is likely to have a positive impact on revenue and profit growth, as   spending and investment gain momentum on the back of the $1.9 bn stimulus   package and the $2.2 bn infrastructure spend.

  • JP Morgan thinks there   could be opportunities for acquisitions, despite the fact that they are the   largest banking group amongst the big four in the US, with potential in expanding   the wealth management operations like their Chinese operations.

  • The group plans to buy   back $30bn of its shares this year, after the FED statement that the banks   were solid enough to withstand any severe recession. The diversity of the   groups business model is a positive aspect in terms of the quality of its   earnings, as is the consistent profit growth, through the cycle.

  • We are long term investors in JP Morgan Chase, which has done well, and I am still a buyer of the shares as US banks seem likely to benefit from a strong economy in 2021 and beyond.

JPMorgan Chase & Co