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Morningstar | JPMorgan's Scale and Product Breadth Should Give the Bank an Advantage Versus Competitors

JPMorgan Chase’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 we'd likely view any potential setbacks at JPMorgan as buying opportunities. JPMorgan now benefits from a nearly unrivaled combination of scale and scope within the United States, creating unique opportunities, including its partnerships with other leading firms like Visa and Amazon. JPMorgan has become the largest bank in the country, with about $1.4 trillion in deposits. Around $400 billion of these funds bear no interest costs whatsoever. Within payments, JPMorgan is the largest issuer of credit cards in the U.S. and the second-largest acquirer. The company’s investment bank is the leading global generator of fees, and the company’s fixed-income, commodities, and currency trading operations are the largest in the world. The cost advantages stemming from scale are evident in the company’s results. The firm’s diversified business model stabilizes results, increases customer switching costs, and allows the company to generate more revenue per dollar of assets than smaller peers. JPMorgan is one of just a handful of large U.S. banks to generate more than 2% of asset balances in noninterest income. JPMorgan Chase is set to fire on all cylinders in 2018. 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 firm's new Sapphire Reserve card contributed to millions of new accounts over the past 12 months, assets under management recently reached a record high, and core loans are growing at a healthy pace as consumer and business confidence rises. Increasing net interest income is also materializing as the Fed raises rates.