bloomsburg investment group - bloomsburg university of ... · new york stock exchange, inc. 127.80...

Bloomsburg Investment GroupEquity Analysis:

J.P. Morgan Chase (JPM) Analyst:

Caleb Putnam, Class of 2022 Kevin Benkovic, Class of 2020

Jon Bibby, Class of 2023 Jacob Bodenschatz, Class 2023

Aaron Best, Class of 2023

Corporate Details:

Name

Ticker

Domicile

Sector

Industry

Exchange

Last Close

Price 52 Wk High

Price 52 Wk Low

Latest Dividend

Dividend Yield % TTM

Beta 5 Yr (MoEnd)

Avg Daily Volume (3 Mo)

Shares Outstanding (mil)

Number of Analysts

JPMorgan Chase & Co

JPM

United States

Financial Services

IG000DA340

NEW YORK STOCK EXCHANGE, INC.

127.80

127.99

91.11

0.90

2.58

1.21

11,520,754.95

3,136.50

7

Corporate Summary:JPMorgan Chase & Co. operates as a financial services company worldwide. It operates through Consumer & Community Banking, Corporate & Investment Bank, Commercial Banking, and Asset & Wealth Management segments. The Consumer & Community Banking segment offers deposit and investment products and services to consumers; lending, deposit, and cash management and payment solutions to small businesses; residential mortgages and home equity loans; and credit cards, payment services, payment processing services, auto loans and leases, and student loans. The Corporate & Investment Bank segment provides investment banking products and services, including advising on corporate strategy and structure, and capital-raising in equity and debt markets, as well as loan origination and syndication; treasury services, such as cash management and liquidity solutions; and cash securities and derivative instruments, risk management solutions, prime brokerage, and research services. It also offers securities services, including custody, fund accounting and administration, and securities lending products for asset managers, insurance companies, and public and private investment funds. The Commercial Banking segment offers financial solutions, including lending, treasury, investment banking, and asset management to corporations, municipalities, financial institutions, and nonprofit entities, as well as financing to real estate investors and owners. The Asset & Wealth Management segment provides investment and wealth management services across various asset classes, such as equities, fixed income, alternatives, and money market funds; multi asset investment management services; retirement services; and brokerage and banking services comprising trusts, estates, loans, mortgages, and deposits. JPMorgan Chase & Co. was founded in 1799 and is headquartered in New York, New York

Bloomsburg Investment Group Opinion:

We as the Financial Sector believe the JPMorgan Chase should be Partially liquidated from the portfolio for the following reasons. With slowing global economy and slowing U.S. economy with recession looming, the group believes it is time to capitalize on the earnings that JPM has accumulated in our portfolio before the markets have a volatile down turn. If JPMorgan has a volatile downturn, the weight and risk it carries in our portfolio can pull value of the portfolio down. Despite all the economic uncertainty, JPM has performed

much better than its competitors and maintains good levels of profitability despite industry headwinds. The leadership of JPM gives the group confidence in the long-term future of

the Bank as a whole. JPMorgan still remains the best bank for our portfolio

of 10US Dollar11/3/2019 JPMorgan Chase & Co

Source: Morningstar Direct

JPMorgan Chase & CoJPM

Corporate Governance: Board of Directors

Linda B. Bammann (age: 63)

James A. Bell (age: 71)

Stephen B. Burke (age: 61)

Todd A. Combs (age: 48)

James S. Crown (age: 66)

James Dimon (age: 63)

Timothy P. Flynn (age: 63)

Mellody Hobson (age: 50)

Laban P. Jackson, Jr. (age: 76)

Michael A. Neal (age: 66)

Lee R. Raymond (age: 81)

William C. Weldon (age: 70)

Corporate Governance: Top Management

James Dimon: Chairman and Chief Executive Officer- 63 years old

Ashley Bacon: Chief Risk Officer- 49 years old

Lori A. Beer: Chief Information Officer- 51 years old

Mary Callahan Erdoes: Asset & Wealth Management CEO- 52 years old

Stacey Friedman: General Counsel- 50 years old

Marianne Lake: Consumer Lending CEO- 49 years old

Robin Leopold: Head of Human Resources- 54 years old

Douglas B. Petno: Commercial Banking CEO- 53 years old




Corporate Governance: Top Shareholders & Insider Transactions

Top Institutional Shareholders Vanguard Group Inc 252,550,479 7.9% Black Rock Inc 216,451,270 6.7%State Street Corp 149,533,773 4.68%Capital Group Companies Inc 128,274,515 4.01%FMR LLC 61,707,459 1.93%

Insider TransactionsGordon Smith -83,289 10/16/2019Eduardo Pinto -53,000 10/17/2019Mellody Hobson 16,000 10/23/2019Lori Beer -13,341 7/17/2019Mellody Hobson 18,200 08/08/2019

Top Individual Shareholders1 Jamie Dimon 7,867,4142. James Crown 576,1253) Pinto Daniel Eduardo 530,8914) Gordon Smith 450,2485) Mary Callahan Erdoes 448,459




Financial Summary, Year End 2016 (in millions)

Market Capitaliza�on

Total Revenue

Gross Profit

Opera�ng Income

Net Income Cont Ops

Net Income

Current Assets

Cash

Total Assets

Current Liabili�es

Longterm Liabili�es

Total Liabili�es

Total Equity

Opera�ng Cash Flow

Inves�ng Cash Flow

Financing Cash Flow

Change In Cash

EBITDA

Enterprise Value

Capital Expenditure

P/E Ra�o Forward

PEG Ra�o

Dividend Yield % TTM

400,844.70

109,029.00

35,900.00

32,474.00

32,474.00

2,622,532.00

256,515.00

14,187.00

197,993.00

34,158.00

149,648.00

34,551.00

11.99

1.82

2.58

Financial Highlights

Quarter 3 Financial Highlights30.1 Billion in Revenue and 9.1 Billion on Net income

with an EPS of $2.68

Balance Sheet: Average loan growth flat YOY

Average deposits up 5% YOY

Tier 1 capital ra�o 14.1%

Consumer and Community Banking Average Loans down 4% YOY

Average deposits up 3% YOY

Ac�ve mobile customers up 12% YOY

Credit card sales up 12% YOY

Merchant Processing Volume 12% YOY

Corporate and Investment Banking Investment Banking up 8% YOY due to higher fees

Fixed Income Market up 25% YOY

Equity market Revenue down 5% YOY

Commercial Banking Net interest income down 5% YOY while total revenue

was down 3% YOY

Asset And Wealth Management Revenue flat YOY

Net income down 8% YOY

Investment Growth

Time Period: 11/1/2016 to 10/31/2019

1/2017 4/2017 7/2017 10/2017 1/2018 4/2018 7/2018 10/2018 1/2019 4/2019 7/2019 10/2019-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

JPMorgan Chase & Co 94.5% S&P 500 TR USD 51.7%




JPMorgan invests $25 million in fintech start-ups

These start-ups are to aid low-income Americans become more financially healthy. The bank redesigned brick and mortar locations to have several meeting rooms that can be reserved for free by people and businesses in the community for financial assistance. This addition is to match the idea that new customers value the quality of environment and service. The industry has already seen other financial sector companies instill the same ideas, such as capital one cafes.

JPM acquisition of Instamed

JPM spent over $500 million to buy the medical payments technology firm InstaMed. This is the largest investment since buying Bear Stearns in 2008. This is their way of keeping up with the fast changing world of payments. This decision was made because of the size of the healthcare market. The US health spending for 2017 was at 3.5 trillion but that is expected to go up to $6 trillion by 2027. Instamed is now a subsidiary of JPM Chase

JPM Removes Mobile Banking App "Finn"

JPM is already the leading bank for millennials so they realized that they did not need an extra service to lure them in. Even though this product was pushed towards the digitally inclined, it still caused a lot of confusion for the clients. JPM elected to move services offered from “Finn” back to the primary Chase Mobile Banking App.

Insiders Quietly Buying JPMorgan Chase & Co.

The executives within JPM are putting their money where their mouth is. Filings with the SEC revealed that the director, Mellody Hobson, has bought 18,200 shares valued at $2.0 million. Also, over the past year, other company insiders have purchased more than 3.4 million shares combined. As well, JPMorgan announced plans to return $40.0 billion to shareholders over the next year, making this the largest investor payout by any U.S. bank over any one-year period. And despite the overall pessimism, JPMorgan has been able to show a profit of $9.7 billion, a 16.1% year-over-year increase, in the second quarter.




Investment Growth

Time Period: 11/1/2014 to 10/31/2019

4/2015 10/2015 4/2016 10/2016 4/2017 10/2017 4/2018 10/2018 4/2019 10/2019-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

JPMorgan Chase & Co 135.6% Bank of America Corporation 97.6% Goldman Sachs Group Inc 20.8%Morgan Stanley 46.9% S&P 500 TR USD 66.8%

Competitor ComparisonMarket

Cap(mil)

(Daily)

Beta 5Yr

(Mo-End)

NetMargin %

TTM

ROA %(TTM)

ROE %(TTM)

TotalAssets

(mil)FY 1

TotalDeposits

(mil)FY 1

GrossLoan(mil)FY 1

JPMorgan Chase & Co

Bank of America Corporation

Goldman Sachs Group Inc

Morgan Stanley

S&P 500 TR USD

78,165.51 1.35 28.57 0.96 11.81 931,796.00 158,257.00 81,656.00

76,863.92 1.36 21.18 0.88 10.78 853,531.00 187,820.00 115,579.00

286,044.42 1.62 28.64 1.10 10.85 2,354,507.00 1,381,476.00 957,262.00

400,844.70 1.21 29.23 1.22 13.92 2,622,532.00 1,470,666.00 984,554.00

8.99 26.14

Snapshot

P/ERatio

Current

P/ERatio

ForwardEPS TTM PEG Ratio

P/BRatio

Current

P/ERatio

Forward

DividendYield %

TTM

TotalDebt

to TotalEquity

FY 1

FinancialLeverage 1

Yr -FY1

TaxRate %

FY 1

JPMorgan Chase & CoBank of America CorporationGoldman Sachs Group IncMorgan StanleyS&P 500 TR USD

12.59 11.99 11.999.80 1.82 1.70 2.58 1.52 11.38 0.2011.73 10.68 10.682.71 1.39 1.17 1.98 1.03 9.69 0.199.71 9.27 9.2723.86 0.85 1.70 3.62 11.80 0.16

10.07 9.02 9.024.60 1.05 2.75 2.64 11.90 0.21

Industry Environment:

The Lending institutions are very important in determining the overall health of the economy. Lending institutions in this sector provide loans to consumers and businesses

that are vital to stimulating the economy. In this sector JPMorgan Operates as one of the leading lending institutions in the United States. Recently, the industry has seen many headwinds with slowing global economic growth and trade uncertainty. The

interest rate environment has cut into interest margins for these lending institutions. Continuing worries over the yield curve and trade can cause a deep decrease in the

demand for loans. The financial sector has outperformed the S&P 500 2% YTD.




Competitor One

Wells Fargo- Wells Fargo & Co. is a diversified, community-based financial services company. It is engaged in the provision of banking, insurance, investments, mortgage, and consumer and commercial finance. The firm operates through the following segments: Community Banking, Wholesale Banking, Wealth & Investment Management, and Other. The Other segment refers to the products of WIM (Wealth & Investment Management) customers served through community banking distribution channels. The Company offers its services under three categories: personal, small business and commercial. It provides retail, commercial and corporate banking services through banking locations and offices, the Internet and other distribution channels to individuals, businesses and institutions in all 50 states, the District of Columbia and in other countries.

Competitor Two

Citigroup - Citigroup Inc., a diversified financial services holding company, provides various financial products and services for consumers, corporations, governments, and institutions in North America, Latin America, Asia, Europe, the Middle East, and Africa. The company operates through two segments, Global Consumer Banking (GCB) and Institutional Clients Group (ICG). The GCB segment offers traditional banking services to retail customers through retail banking, commercial banking, Citi-branded cards, and Citi retail services. The ICG segment provides wholesale banking products and services such as fixed income and equity sales and trading, foreign exchange, prime brokerage, and derivative services.

Competitor Three

Bank of America - Bank of America is a financial institution, serving individual consumers and others with a range of banking, investing, asset management and other financial and risk management products and services. The Company, through its banking and various non-bank subsidiaries, throughout the United States and in international markets, provides a range of banking and non-bank financial services and products through four business segments: Consumer Banking, which comprises Deposits and Consumer Lending; Global Wealth & Investment Management, which consists of two primary businesses: Merrill Lynch Global Wealth Management and U.S. Trust.

Competitor Four

Morgan Stanley - Morgan Stanley provides investment banking products and services to its clients and customers including corporations, governments, financial institutions, and individuals. It operates through the following business segments: Institutional Securities, Wealth Management, and Investment Management. The Institutional Securities segment provides financial advisory, capital-raising services, and related financing services on behalf of institutional investors. The Wealth Management segment offers brokerage and investment advisory services. The Investment Management segment provides equity, fixed income, alternative investments, real estate, and merchant banking strategies.




Strengths:

Leadership of Jamie Dimon Jamie Dimon has inspired confident amongst investors his entire career. held largely responsible for steering the bank through the financial crisis and the bank’s assets have risen by more than 100% since his appointment, while earnings have increased threefold.

Out performance of primary competitors JPM has a market cap of $396 billion. No other major bank comes close to a market cap of that size. JPM has also out performed it’s competitors in 1 year growth.

The Largest Bank in the United States JPM is clearly considered the largest bank in the United States with assets totalling $2.74 trillion. The closest competitor by asset total is Bank of America with $2.38 trillion in assets.

Chase BrandChase is the name for JPM’s retail banking sector. Chase deals with online banking, credit cards, auto loans, and home loans. Chase is a mainstream retail banking giant that only increases JPM’s size and reach.

Most popular among millennialsJPM’s popularity amongst millennials is due to their large Chase presence. Specifically, Dimon pointed to the popularity of Chase’s Sapphire card, which offers travel perks and points, as one of the ways the bank is luring in the under-40 set.

Online Banking JPM has a strong online banking presence stemming from their Chase brand and demand for online banking among millenials. JPM, the highest spender, has a $11.4 billion technology budget this year, a 5.6% uptick from last year's $10.8 billion.

Weaknesses:

Heavily affected by adverse economic conditions Since JPM is so heavily diversified in areas such as consumer banking, mortgage lending, and wealth management; poor economic health could heavily affect JPM. An economic downturn could cause people to lose jobs and could decrease application for loans and mortgages.

Brexit and China Trade deal fallout on consumersJPM relies heavily on commercial and consumer loans. Trade wars typically mean less demand for loans both domestically and globally. This will hurt JPMorgan’s future profitability. JPMorgan also has a heavy presence in Europe and the UK. A no deal Brexit can complicate employment and other factors that affect JPM’s profitability.

Performance cyclical to economyJPM has shown over the years that it generally follows the economy performance wise. JPM moves with the economy due to their heavy presence in investment banking and asset wealth management. Another area of the economy that impacts JPM is interest rate environment. JPM generates revenue off interest on loans. When the fed decides to cut interest rates, JPM loses money.

Competition from Financial institutions JPM has many competitors that offer similar services. Competition from these lending institutions can pull away from JPMorgan’s primary services. Positive news or events from these competitors can pull customers and hurt the growth of JPMorgan.

Opportunities:

Online Banking and Technology 49 million active digital customers and is continuing to grow. JPMorgan continues to grow and invest in Online and Technology will allow more people to use JPMorgan’s services with ease.

Expansion into medical payment transaction processingRecently bought payment processing firm, InstaMed in a $500 million acquisition. This got them into the $3.5 trillion market for U.S. health-care spending. They processed $94 billion in transactions last year. This market is set to expand greatly as medical costs continue to rise

Regulation Roll BackRollbacks on legislation can provide more opportunity for growth and allow banks to increase their dividends to stockholders. Decreased regulations can allow for more loan investments

Potential 2020 Republican President Typically a Republican Party President has allowed for less regulation on not only financial institutions but also business as a whole. Reduced regulations can allow banks to explore into different and more risky investments that can yield more profitability.

Threats:

Slowing Global/Domestic Economic GrowthA slowing economy hurts JP Morgan’s revenue streams. A slowing economy causes a decrease in loan volume, consumer sentiment, and business investment. The banking industry as a whole takes a hit during these times.

Continuing global tensionGlobal tension can lead to a slowing global economy. A slowing global economy hurts JP Morgan specifically due to their high foreign presence.

Cyber Attacks Cyber attacks can be the biggest threat to the financial industry since the industry has not seen a large scale cyber attack yet.

Potential 2020 Democratic Party PresidentLarge banks and wealth distribution is a forefront issue of the Democrat party. Potential tougher regulation on the banking industry.




Valuation: Discount Cash Flow Model (DCF)

Using the DCF model, we arrived at a fair intrinsic value of 142.66. We believe that this is more realistic valuation of the stock. We are very optimistic about JP Morgan's long term growth but slowing economic growth and macroeconomic events slow JPMorgan’s short term performance.

Valuation: Discount Dividend Model (DDM)

Using the Discount Dividend Model, we arrived at a fair value of 130.24 for the stock. We believe that this undervalues JPMorgan and their growth potential. JPMorgan continues to increase their dividends to their stockholders and will continue to do so especially headed into a period of economic uncertainty

Valuation: Multiple Valuation

The Multiples Valuation yielded a fair value of $79.23 for JPMorgan Chase. This valuation completely undervalues JPMorgan value and growth. This was calculated by taking the 10-year average historical PE ratio multiplied by the average estimated earnings per share for the next 5 years . We believe that this is not a accurate depiction of JPMorgan’s fair value.




Bloomsburg Investment Group Disclaimer

This report was developed by student members of the Bloomsburg Investment

Group (BIG). The purpose of the report is to provide research analysis of securi�es

to poten�al and exis�ng donors of The BIG Fund. The report is designed to

exemplify the abili�es of our members through investment research and analysis.

Analysts of the Bloomsburg Investment Group and The BIG Fund are not registered

brokers, investment advisors, or licensed financial professionals. The generated

opinion of our analysts is not an offer or solicita�on to buy or sell any security, and

due diligence is recommended before making any financial transac�on.

Informa�on included in this report was compiled from different public sources.

Not all relevant data was included into the report, and accuracy is not guaranteed.

Students, faculty, and staff of Bloomsburg University may have a financial interest

in any company listed in this report.

Sources Cited

JPM SEC 10K Filing

JPM Quarterly Earnings Reports

CNBC

Market Watch

Barrons

Yahoo Finance

Capital IQ

Bloomberg Terminal



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