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June 11, 2020

June 11, 2020

JPMorgan Chase: a safe haven in the banking sector? Part 1Mikhail Hypov

**JPM: Analysis of the company’s reliability based on fundamental

and historical factors.**

In this article I continue analysing US blue chip companies. Last time, I analysed [General Electric Company]1. Today, I’m analysing the global banking conglomerate [ JPMorgan Chase][3] which became the basis of the world’s bank system. To have an approximate idea of this giant’s scales, let’s have a look at the following numbers.

[ JPMorgan Chase][3]’s assets under management amount to 3 trillion USD. Compare it with the 2020 target GDP of Russia for example: it’s less than 2 trillion USD at the current rate. Total assets of [ JPMorgan Chase][3] exceed 25 trillion USD. It is the largest bank in the United States and the sixth largest bank in the world by total assets. [ JPMorgan][3]’s hedge fund exceeds 45 billion USD and is the world’s third largest fund.

History

The history of [JPMorgan Chase][3] is so long that it deserves a fully- fledged book. I’m going to mention the milestones in the company’s development for a better understanding of this business and its fundamental basis.

The most important event that has determined the company’s modern history is reflected in its name [JPMorgan Chase]3. the merger of two giant financial groups Chase Manhattan Bank and J.P. Morgan & Co. Each of those two companies was significant and self-sufficient. Before merging into [JPMorgan Chase][3], both companies had been developing since the first half of the 19th century and had incorporated almost a thousand various companies and financial structures each. The date of the company’s foundation is the year 1799 when the “Bank” of the Manhattan Company was set up. That bank had been developing quite successfully, but the key event was its merger with Chase National Bank created in 1877 by famous financial publisher and banker John Thompson. Then the united bank became one of the largest national banks. A tight cooperation with the Rockefeller family was another spur to the bank’s development. Its status upgraded and it got the reputation of the country’s most reliable bank. Next, Chase Manhattan Bank became closely associated with the oil industry and the accounts of the oil giant [Standard Oil][4]. 

[John Pierpont Morgan][5], the founder of [J.P. Morgan & Co][6], was on the other side of the future conglomerate [JPMorgan Chase][3]. John came of a family of businessmen and continued his father business.  His bank, created in 1871, became the world’s largest bank to link the Old and the New Worlds:  Morgan’s connections with Austria and France had made it possible.

The First World War became the golden age of J.P. Morgan & Co. The Bank was engaged in government lending activities and loaned 500 million USD to England and France. The bank was responsible for the main volume of purchases of food and raw materials worth 3 billion dollars during the war.

J.P. Morgan & Co and Chase Manhattan Bank lived through the Great Depression successfully and got into another development wave during the World War II, issuing war bonds and loans to the Allies.

In 1946, David Rockefeller, head of the Rockefeller family, became chief executive of Chase Manhattan Bank. Thus, Chase Manhattan Bank became a home bank of the Rockefeller family. Globalisation and rising competition on the part of Asian banks encouraged the merger of two giants, J.P. Morgan & Co and Chase Manhattan Bank. In 2000, there appeared a bank conglomerate currently known as [JPMorgan Chase][3]. In fact, it’s the alliance of two influential families - the Rockefeller and Morgan families.

Fundamental **** analysis

In 2011, the company was given the status of a systemically important bank (the document is [ here][7]). The list features the companies whose failure might collapse the global economic system. So, [JPMorgan Chase][3]’s financial stability is both the US and world priority. On the other hand, this status implies a higher responsibility and exposes the company to extra control of state agencies.

The bank’s reliability rating is high. [JPMorgan Chase][3]’s bad debt coverage ratio of 1-4 is perfect. The total of bad credits in the portfolio doesn’t exceed 0.6% of the total amount (2% is considered as a borderline value). Also, the number of loans doesn’t exceed 56% of deposits and 36% of total assets (125% and 110% are critical values for a bank, respectively).

All these indicators and historical facts point to the bank’s financial stability and low bankruptcy risks in the nearest future.

![LiteForex: J.P.Morgan Chase stock: fundamental basis for long-term growth][8]

At the same time, we see in the chart above that the company is trading below the market on the whole. It’s a natural phenomenon as the financial sector is deemed to be the riskiest during crisis times.![LiteForex: J.P.Morgan Chase stock: fundamental basis for long- term growth][9]

If we draw an analogy to the 2008 crisis, we’ll see that [ JPMorgan Chase][3]’s stock dropped 34% below the market. The growth at the peak was 20% above the market amidst a faster recovery. If we measure the distance between these extremum points, we see that the per cent rise of the stock was 50% higher than the S&P500 index’s rise. Fundamentally [JPM][3] stock’s chance of a faster growth in the long term in the post- crisis phase of growth is quite high. So, the stock can be safely kept in the portfolio in the long term.  As for the short-term technical analysis, check my next article.

Subscribe and keep in touch!

Remember that you can buy [JPMorgan Chase][3] stock any time at LiteForex. If you still don’t trade, it’s time to start right now: the broker is raffling fabulous prizes to celebrate its [15th anniversary][10]. Everyone can win!

Good luck and profits, everyone!

Yours,

Michael @Hypov

I’d like to remind you that all materials are provided for educational purposes only. They aren’t financial advice and don’t guarantee any profits. All trading decisions you make are your responsibility only.

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” :)

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

Useful links:

  • I recommend trying to trade with a reliable broker [here][11]. The system allows you to trade by yourself or copy successful traders from all across the globe.
  • Use my promo-code BLOG for getting deposit bonus 50% on LiteForex platform. Just enter this code in the appropriate field while [depositing][12] your trading account.
  • Telegram channel with high-quality analytics, Forex reviews, training articles, and other useful things for traders

Price chart of JPM in real time mode

![JPMorgan Chase: a safe haven in the banking sector? Part 1][13]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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  1. my.liteforex.com/trading/chart?symbol=#GE&returnUrl=true
  2. www.liteforex.com/blog/analysts-opinions/general-electric-company-fundamental-and-technical-analysis-global-cycles-and-medium-term-forecast/
  3. my.liteforex.com/trading/chart?symbol=#JPM&returnUrl=true
  4. en.wikipedia.org/wiki/Standard_Oil
  5. en.wikipedia.org/wiki/J._P._Morgan
  6. en.wikipedia.org/wiki/J.P.Morgan%26_Co.
  7. www.fsb.org/wp-content/uploads/P161118-1.pdf
  8. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.11/JPM_hypov_1.jpg?w=30&s=1ebf6d2df16526e5b8351d443951853e
  9. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.11/JPM_hypov_2.jpg?w=30&s=6a85c9f714eeb10001d256c7583f5f11
  10. www.liteforex.com/contests/dream-draw/?_ga=2.62491052.1027453424.1589809964-2095657289.1460018267
  11. my.liteforex.com/?category=analysts-opinions&slug=jpmorgan-chase-a-safe-haven-in-the-banking-sector-part-1&openPopup=%2Fregistration%2Fpopup&utm_source=blog&utm_medium=article&utm_campaign=bonus
  12. my.liteforex.com/deposit/?category=analysts-opinions&slug=jpmorgan-chase-a-safe-haven-in-the-banking-sector-part-1&promo_code=BLOG&utm_source=blog&utm_medium=article&utm_campaign=bonus
  13. cdn.liteforex.com/cache/uploads/blog_post/cryptocyrrency/hyipov/2020.06.11/JPM_hypov_logo.jpg?q=75&w=1000&s=b2399e866cff11e3d9bb7b7c45f3497b