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JPMorgan: Strong Diversification And Excellence Across Segments

Mar. 04, 2021 9:13 AM ETJPMorgan Chase & Co. (JPM) Stock5 Comments
Khaveen Investments profile picture
Khaveen Investments


  • JPMorgan has grown remarkably under CEO Jamie Dimon’s leadership which has catapulted the bank to be one of the largest in the world.
  • The bank is highly diversified with four major operating segments across consumer, commercial, investment banking and wealth management.
  • The investment banking segment grew by 26% YoY on increased market activity, but could taper off in 2021 while other segments could remain stable despite the low interest rate environment.
  • We compared the bank against its peers and valued the company using a modified DCF analysis, whereby we excluded its financing related Capex, to obtain a more reliable free cashflow.

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Source: JPMorgan

JPMorgan Chase (NYSE:JPM) has an incredibly long history dating back to 1871 and has grown to become the largest bank in the US and fifth largest globally with over $3.2 tln in assets. It is a highly diversified financial institution that excels at every segment it is in. The bank's core businesses span across a multitude of areas within the banking industry including consumer and commercial banking, investment banking and wealth management. Moreover, the bank has a solid track record with a strong management team and leadership and has managed to emerge from the GFC better off than its peers. The bank has a conservative portfolio with excellent business strategy execution.

With the advent of Fintech, financial institutions risk losing market opportunities to emerging fintech companies such as Square (SQ) and PayPal (PYPL). JPMorgan understands the real risk of getting left behind and is increasing investments and securing partnerships with startups and developing new solutions to cater to evolving consumer demands and be placed to withstand the disruption pressures from Fintech firms. Additionally, JPMorgan is planning to resume its share repurchase program with a record amount of $30 bln after a restriction by the Federal Reserve was lifted as well as boasting a strong dividend track record. In the final section, we valued the company based on a modified discounted cash flow valuation method by adjusting its free cash flows only including cash flows not related to its core operational activities to obtain a more reflective stream of free cash flows used for the valuation.

The bank has a highly diversified business model operating across four major operating segments namely consumer & community banking, corporate & investment banking, commercial banking and asset & wealth management. In terms of its revenue breakdown, the corporate & investment banking segment contributes $49.2 bln or 40.1% in revenues. Although growth is expected to taper off, the long-term outlook

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Khaveen Investments profile picture
Khaveen Investments is a Global Macro Quantamental Hedge Fund managing a portfolio of globally diversified investments. With a vested interest in hundreds of investments spanning diverse asset classes, countries, sectors, and industries, we wield a multifaceted investment approach that combines top-down and bottom-up methodologies, integrating global macro, fundamental, and quantitative investment strategies. We serve accredited investors throughout the globe, which include HNW Individuals, Corporates, Associations, and Institutions. At the heart of our investment prowess lies specialized expertise in cutting-edge technologies that are reshaping the fabric of numerous industries. Our strategic orientation centers around a spectrum of booming domains, encompassing the transformative realms of Artificial Intelligence, Cloud Computing, 5G, Autonomous & Electric Vehicles, FinTech, Augmented & Virtual Reality, and the Internet of Things.www.khaveen.com

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in JPM over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

No information in this publication is intended as investment, tax, accounting, or legal advice, or as an offer/solicitation to sell or buy. Material provided in this publication is for educational purposes only, and was prepared from sources and data believed to be reliable, but we do not guarantee its accuracy or completeness.

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Comments (5)

porky11 profile picture
JPM is a great core holding but like other 5 Star companies (ie JNJ) its price has now pushed its yield pretty low compared to its peers.
Librarian Capital profile picture
I don't understand how anyone can talk about EBIT and FCF for a bank.
BM Cashflow Detective profile picture
Shares in the best bank should also be in the hands of shareholders with the greatest conviction.

I'm long $JPM
JPM = best in class.
Best of breed JPM, YTD, up 20%, great management good stock if you want banking in your portfolio.
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