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Morningstar | Core Business Is Great For JPMorgan, but Rate-Cut Pressures Loom

JPMorgan Chase is arguably the most dominant bank in the United States. With leading investment bank, commercial bank, credit card, retail bank, and asset and wealth management franchises, JPMorgan is truly a force to be reckoned with. The bank's combination of scale, diversification, and sound risk management seems like a simple path to competitive advantage, but few other firms have been able to execute a similar strategy. Even the best-managed banks are not immune to the occasional stumble, but JPMorgan has managed to seemingly put all the pieces together in a more cohesive and less error prone way than peers.JPMorgan now benefits from a nearly unrivaled combination of scale and scope within the United States. JPMorgan has become the largest bank in the country by assets and has about $1.5 trillion in deposits. Around $390 billion of these funds bear no interest costs whatsoever. Within payments, depending on the metric, JPMorgan is generally the largest credit card issuer in the U.S. and the second-largest U.S. acquirer by purchase volume. The company’s investment bank is the leading global generator of fees, and JPM's FICC trading desk remains one of the top global players. The scale and multiple revenue sources allows the bank to increase customer switching costs, generate more revenue per risk-weighted asset than smaller peers, and also have a larger percentage of revenue come from fees. We also see scale leading to larger, more scalable tech budgets, which should only increase in importance in the future. JPMorgan Chase is again set to fire on all cylinders for the year, and the bank is firmly on offense. The company's balance sheet is strong, with a common equity Tier 1 ratio well above regulatory minimums and more than half a trillion dollars in high-quality liquid assets. Credit quality remains pristine, and performance is strong across the company's lines of business. The bank is also expanding into the largest remaining urban markets where it lacked a branch presence. Given the bank's compelling product offerings, we see overall banking competition heating up and JPMorgan being one of the fiercest competitors.