JPMorgan Chase (JPM), now the country’s biggest bank, has established itself as the leader among its money-center competitors, essentially Citigroup (C) and Bank of America (BAC).
JPMorgan, under its talented CEO Jamie Dimon, was able to avoid the big losses that those two competitors and other big banks around the world suffered during the financial crisis of 2007 to 2009. That’s because JPMorgan was much more careful about managing its risk than the others.
This superior risk management stems from the fact that JPMorgan was one of the first banks to centralize its risk management activity during the past 10 years.
JPMorgan’s non-performing assets represent less than 1 percent of total assets, and its allowance for loan losses totals 4 percent-plus of total retained loans. Those are pretty impressive numbers.
Not surprisingly, JPMorgan doesn’t have a huge exposure to Europe — $15.1 billion at the end of the third quarter. So it should be able withstand the continent’s debt crisis without major suffering.
Another sign of safety is that JPMorgan clears almost half of its derivatives trading centrally. The bank had more than $100 billion worth of derivative net receivables as of Sept. 30.
JPMorgan’s profit slipped 4 percent to $4.3 billion in the third quarter from a year earlier. Revenue was virtually unchanged at $23.8 billion.
Erik Oja, an analyst at Standard & Poor’s has a hold rating on JPMorgan shares. He likes the company’s 3 percent dividend yield and sees a good chance for the bank to raise its dividend again next spring.
“JPM's fundamentals are near the top of the U.S. banking industry,” Oja writes. “Should the U.S. economy continue to improve, JPM's capital levels should rise from retained earnings and be sufficient to meet upcoming Basel III requirements. JPM has ample reserve coverage . . . above most peers.”
The company next reports earnings Jan. 13.
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