The banking sector was among the few unfortunate businesses to bear the major brunt of the recent economic recession. JP Morgan too had to face its fair share of scares and disappointments. However, in the post economic crisis outlook, leading brands of global banks have staged a quick recovery, led by aggressive trading in the stock market.
JPMorgan Chase (JPM) is one of the largest global banking institutions and provides an array of financial services to customers and multinational organizations spread across six continents. Its Investment Banking sector provides a range of investment banking services and products such as corporate advice, strategy devising, capital-raising and risk management among many others.
JP Morgan started the current financial year on the right footing. The stock has been able to capitalize on its impressive performance at the close of the previous financial year; a time when financial stocks led the broader market higher. With the start of January, the stock was quick to post gains amidst aggressive pre-open trading which caused shares to rise by nearly 2.1%. The stock continued its impressive rally with a growth of 4.3%, which helped to push up financials.
JP Morgan is a massive business with a market capitalization of more than $164 billion. Although it is currently well poised at a trading price of around $44, the stock is currently following an upward trend largely due to aggressive market trading. This has allowed it to gain as much as $1 in the last two weeks, pushing the average trading volume figures up to almost $33 million.
The stock faced its first jitter of the year when ongoing problems in Europe caused the stock to shed nearly 0.89% amidst sluggish trading and market uncertainty. However, the stock was seen to continue to spearhead the upward rampage of financials. The impetus that the stock gained as a result of impressive financial performance in previous months is overwhelming and has greatly helped the stock survive the adverse effects of a U.S. Mortgage Pact that sent other stocks on a downward spiral.
The stock's performance in the following days leading up to April has been mixed, with a lot of ups and downs. Some analysts have been only too eager to lambaste JP Morgan, calling it a high-risk low-yield investment that would fail to deliver in the current year. However, I believe that the stock has all the firepower to come out on top of all the negative forces working in the market.
JP Morgan enjoys a wide competitive moat, which has largely been the result of a diversified product and services portfolio and massive market shares across the globe. A beta of 1.26 has allowed the business greater resilience toward negative market forces and this has largely encouraged investors to trade in the stock. JP Morgan also has an impressive price-to-earnings ratio of 9.85, which is good when compared with industry standards. JP Morgan has also maintained an impressive dividend history over the years. It currently has a dividend yield of nearly 2.8% and last paid investors nearly $1.20 in dividends on earnings per share of $4.48.
However, not all is good about the stock at the moment as it struggles to deal with the newly proposed U.S. Mortgage Pact that is sure to have an adverse effect on the business. Moreover, the stock also faces scrutiny from the Federal Reserve for its negligence and misconduct in the handling of foreclosures by its mortgage servicing units. The stock also faces a new string of legal issues after it was sued by Ambac Financial Group and DZ Bank over mortgage losses. All these recent developments have an underlying propensity to cause the stock's upward drive to stagnate or even plummet. Furthermore, it incurred a trading loss of $2 billion in May 2012 that was later attributed to inadequate risk controls. In addition to the trading loss, JPMorgan Chase and Co also witnessed a drop in its credit ratings and a loss of $15 in market value.
Citigroup (C) was, at one time, the world's largest banking institution. However, the global business fell under the burgeoning weight of its own financial liabilities during the economic crisis to make way for JP Morgan as the new undisputed leader of global banking. Citi has performed well in the last few financial quarters and this has helped it to grow. However, when compared with JP Morgan, Citi's financial indicators seem ordinary; market capitalization of $96 billion; trading at a price of around $33; a yield of 0.12%; and earnings per share of $3.60. Citi has recently experienced sluggish trading and mixed investor sentiment after it was learned that the global banking institution had deliberately violated certain money-laundering laws. As a result, investors have preferred to invest their money in JP Morgan instead as uncertainty looms over which direction Citi will be headed.
Over the years, Bank of America (BAC) has emerged as one of the leading banking institutions across the globe with a massive market capitalization of nearly $96 billion. The stock got off to a flying start at the start of the current financial year with a quarterly revenue growth of more than 27%. Currently, Bank of America is a wonderful stock to invest in as it is literally spearheading the financial stock rally. However, the stock's tendency to fall after recording marginal gains should not be underestimated and this is a leading reason why major investors continue to prefer JP Morgan instead.
Barclays (BCS) has been deemed the underdog among leading bank stocks with a market capitalization of almost $40 billion and average trading volume touching $6 million. Although Barclays has an impressive price-to-earnings ratio of 8.72, which exceeds industry standards, the trading price has fallen sharply over the last few weeks, finally coming to rest at around $13. This was largely the result of disturbing news that the bank was involved in the alleged manipulation of interbank lending rates. The stock also has lower earnings per share of $1.55 compared with JP Morgan's $4.48. Net income of $4.77 for the last quarter was impressive although it came nowhere close to JP Morgan net income of $17.57 billion. If I were to judge both the stocks on security of investment and overall portability, I would certainly prefer to invest my money in JP Morgan as it has performed exceptionally in the current fiscal quarter.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.