Is JP Morgan Stock The Best Bet Among Big US Banks?

  • The biggest bank by assets, JP Morgan Chase, became the best big bank to buy in 2015.
  • The bank combines both risk and non-risk assets, a huge deposit bank, credit card operations and trading.
  • CEO Jamie Dimon is the face of American banking.

If you are looking for safety in a stock investment, you are looking for a big bank.

Even when they fail, they are too big to fail. They get bailed out by the government and, while shareholders may take it in the shorts for a time (Citigroup (NYSE:C) is still worth $5 to a 2007 shareholder after its 1:10 reverse split) they tend to come back in the end.

Through most of this recovery the best of the lot was Wells Fargo (NYSE:WFC). Since the bottom of the recession, about March of 2009, Wells is up about 300% in value. Even over the last five years, Wells is the clear leader, and the dividend has gone up from 5 cents a share all the way to 38, meaning it yields 2.77% for new shareholders.

WFC stock chart

Source: JP Morgan stock vs Wells Fargo stock vs Citigroup stock by amigobulls.com

Wells did it mainly by steering clear of risk. Wells is the leader in home mortgages, by far. It has the largest branch network in the country. The assets it acquired during the recession, like Wachovia, have paid off big, giving what was a California-based bank a national footprint.

But times have changed. The preference for risk-off has become a preference for risk-on. Trading can work, mergers can work, advising can work, and IPOs can work. It’s not like it was, risks need to be balanced. And no big bank balances risks better today than JP Morgan Chase (NYSE:JPM).

Since the start of the year JPM stock is up 5%, while that of Wells is basically flat. The 44 cent/share dividend yields 2.67%, quite comparable to the yield at Wells. This has happened despite high capital requirements placed on “too big to fail” banks, and other government efforts to make sure that these banks don’t, in fact, fail.

JPM’s full name is JP Morgan Chase. It was created in 2000 by the merger of JP Morgan, once the dominant investment bank in the country, the famed House of Morgan to which ordinary depositors need not apply for service, and Chase Manhattan, known in New York for generations as “the Rockefeller bank,” where the late David Rockefeller built the city he called home.

Today’s J.P. Morgan is JPM CEO Jamie Dimon, a Midwestern banker who joined the company in 2004, with its acquisition of Bank One, and led the firm through the 2008 crisis, during which it acquired Bear Stearns. He has become the face of American banking, and under his leadership JP Morgan Chase has become the biggest bank in the world by assets.

The question, of course, is what he is doing with those assets. The answer, so far in 2015, is about $19 billion in net income, of which just 26 cents has gone to shareholders, meaning your dividends there are safe. The balance sheet shows only 20% of its $2.4 billion in assets were subject to debt in September. Safety and profit is what investors want today, and JP Morgan Chase has more of both than anything else you can buy.

Meet the new boss. Same as the old boss.

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  • I do not have any business relationship with the companies mentioned in this post.
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