The investment banks that barely survived the financial crises are back on their feet. According to a recent Bloomberg report, the total fees charged by the industry increased by 6% to $49.1 billion. JPMorgan Chase (JPM) ranks at the top, followed by Morgan Stanley (MS) and Goldman Sachs (GS). JPMorgan was also the most profitable company in stock equities and bond underwriting. Goldman Sachs took the top spot in advisory fees (fees from mergers and acquisitions advice). Here, is a fundamental analysis of the top 10 global investment banks:
JPMorgan Chase (JPM) - USA: JPMorgan is one of the oldest financial institutions in U.S. With total assets of $2 trillion, JPMorgan is a global investment titan that operates in 70 countries. Last year's operating margin was 24.21% with a net profit margin of 16.91%. Earnings per share increased by 50%; from 0.75 in the last quarter of 2009 to 1.12 in the last quarter of 2011. (SPY) is the largest holding in JPMorgan's portfolio followed by Yanzhou Coal Mining (YZC), and Apple (AAPL).
Morgan Stanley (MS) - USA: Morgan Stanley is another truly global financial holding. The current P/E ratio of 12.48 is below the industry average. Forward P/E ratio of 8.48 indicates higher growth expectations. The gross margin of 68.74% is one of the best among investment banks. (SPY) is the largest holding in Morgan Stanley's portfolio followed by iShares Russell 2000 (IWM) and Apple (AAPL).
Goldman Sachs (GS) - USA: In 2010, Goldman Sachs' sales increased by 26.20%. EPS growth was an impressive 147%. The gross margin of 68.74% and net profit margin of 14.36% is well above industry standards of 23.03% and 4.24%. SPY is the largest holding in Goldman Sachs' portfolio followed by Microsoft (MSFT) and Apple (AAPL).
Bank of America (BAC) - USA: Bank of America Corporation is a financial holding company and is also involved in commercial banking. The company is one of the few banks that still has not fully recovered from the economic depression. In 2010, both operating and net profit margins were negative. Price to cash flow ratio of 445.71 is well above the industry average. Warren Buffett sold his entire stake in the company. One might need to be careful with Bank of America, since its beta value of 2.21 shows extreme volatility.
Deutsche Bank (DB) - Germany: Deutsche Bank AG is a Germany based global investment bank that offers a range of investment products worldwide. While sales did not grow much in the last year, the company paid dividends at a yield of 1.83%. The current operating margin of 14.30% and net profit margin of 8.38% show mediocre profitability.
UBS (UBS) - Switzerland: UBS is another financial service company that operates on a global scale. The P/E ratio of 8.96 is below the industry average. UBS has a strong balance sheet with a debt/asset ratio of 18.72%. The net profit margin increased by 23.29% in 2010.
Credit Suisse (CS) - Switzerland: Credit Suisse operates in three segments; private banking, investment management and asset management. The current P/E ratio of 9.34 is below the industry average. Net profit margin is 19%. Credit Suisse one of the few dividend players among investment banks with a current yield of 3.32%.
Barclays Capital (BCS) - UK: Barclays is another non-US based international financial services provider. Barclay's metrics are similar to that of Credit Suisse. The current P/E ratio of 9.78 is below industry average. With a gross profit margin of 18.84 %, and dividend yield of 1.91%, Barclays is more profitable than Deutsche Bank.
Citigroup (C) - USA: Thanks to the huge U.S. bailout program Citigroup financial services barely survived the financial crises. Price to book ratio of 0.79 is below the industry average of 0.99. The debt/asset ratio of 32.46% is higher than that of UBS. Net profit margin in 2010 was 12.65%. Citibank is among the most favorite hedge fund stocks.
Nomura Holdings (NMR) - Japan: Nomura is a financial services provider located in Tokyo. Nomura was the only Asian based investment bank that made into the top 20 list. However, the stock price slumped after the massive earthquake disaster. Current price is below the 52 week-low which might offer a good opportunity for contrarian investors.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.