JPMorgan Chase & Co. (JPMorgan Chase) was incorporated in 1968 and has since evolved into a large corporation currently employing 168,955 individuals. Traded on the New York Stock Exchange under the ticker symbol JPM, JPMorgan Chase is a global financial services firm with operations in more than 50 countries.
A merger between JPMorgan and Bank One occurred in July of 2004, creating one of the largest and most powerful banks in the United States. JP Morgan supplies a national banking association with branches in 17 states, while Chase Bank USA provides the firm's credit card issuing bank. The company's wholesale businesses are comprised of four segments: investment banking, treasury and securities services, commercial banking and asset and wealth management. The company's consumer businesses consist of retail financial services and card services. Since JP Morgan Chase & Co.'s inception, the corporation has shown solid growth, now with assets of $1.2 trillion.
The Bank One acquisition cost an astonishing $58.5 billion. This was done in order to save the unified corporation approximately $3 billion (pre-tax) by the year 2007, even though the costs of merging and combining operations will be $4 billion (pre-tax). The estimated merger-related charges are a product of actions taken with respect to both JPMorgan Chase's and Bank One's operations, facilities and employees.
Over the past year, the stock price has pulled back a bit. After falling to its one-year low of $32.92 in October, it has rebounded after reporting that net income surged 79 percent to $2.5 billion in the third quarter. Since then, the stock has been increasing in value and is currently selling for approximately $38.30.
During the 15 months since the merger with Bank One, the bank reported two poor quarters out of four due to terrible trading results. This year the stock price has been underperforming its peers. JP Morgan was one of Wall Street's most profitable banks before the merger with Bank One, but after the acquisition, the banking sector began to question the merits of the merger. As a result, JPMorgan's stock has suffered. Additionally, many fear that Chief Operating Officer James Dimon might go on an acquisition hunt before the full benefits of the Bank One deal are harvested.
But in the third quarter, the financial situation began to look better. The strong rebound is attributed to the bank's traders who generated $2.4 billion of revenue, four times as much as the second quarter. The investment banking division earned just over $1 billion, more than twice as much as the second quarter. JPMorgan made an additional $700 million post-tax gain from the lucrative sale of Brown, its online broker. These earnings helped offset the 33 percent fall in earnings at the retail bank because of a Hurricane Katrina-related charge. These positive results may move JPMorgan Chase shares above their relatively low valuation of about 1.3 times their book-value (the net value of the company's assets).
Additionally, continued strong performance depends heavily on trading results, where the bank still has not proven its reliability. The debut of Trading Algorithmic Optimizer (TAO) announced by JPMorgan on Nov. 1 may improve their trading results, too.
There are some macroeconomic factors driving the ongoing bullish episode of JPMorgan as well: the United States' strong third-quarter economic growth (despite rising interest rates and Hurricanes Katrina and Rita) and growth in worker productivity.
Overall, JP Morgan Chase is a company worth focusing on. The large banking conglomerate is a one stop shop for the everyday consumer, as well as corporate clients. Currently, a hold recommendation would be the optimal strategy.
JPMorgan has had a recent rise in its stock price, and therefore a pullback is likely. Though JPMorgan is not a growth stock, it will continue to provide value and security over the long term.
