Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Citigroup Inc (C), JPMorgan Chase & Co. (JPM) & Toronto-Dominion Bank (USA) (TD): There Are Very Different Choices in Financials

Page 1 of 2

During the course of observing the markets before, during, and after the financial crisis, I noticed three specific categories that financial companies could be categorized into. The first are those companies who, through poor lending practice, high leverage, or other general irresponsibility were hit hard by the crisis. This category includes companies who failed, like Lehman Brothers, as well as companies who endured due to government help like Citigroup Inc (NYSE:C). The second category belongs to those banks who stayed relatively neutral, whose loan portfolios had decent quality, and who continued to do what they had been doing. Toronto-Dominion Bank (USA) (NYSE:TD) is a good example of this group.

Citigroup Inc (NYSE:C)

The third category, and by far the most exclusive club, is those financial institutions that not only survived, but came out of the crisis even better than they went in. These are the companies, like JPMorgan Chase & Co. (NYSE:JPM) that scooped up their failing competitors for pennies on the dollar, boosting their own asset bases and geographic footprint. These are the kind that we should be looking at for the long run, as the full positive impact of some of their savvy moves during the bad times won’t be realized for years. Let’s look a little more in depth at JPMorgan Chase & Co. (NYSE:JPM), and then take a quick look at the other two categories and their long-term investability.

JPMorgan in a nutshell

As one of the world’s leading investment banks, JPMorgan Chase & Co. (NYSE:JPM) serves a range of clients including corporations, governments, other financial institutions, and individuals. The company operates in five segments including: Consumer and Community Banking, Corporate and Investment Banking, Commercial Banking, Asset Management, and Corporate/Private Equity.

During the financial crisis, JPMorgan scooped up both Bear Stearns and Washington Mutual for a small fraction of what they were worth just a few years earlier. The result was both a massive spike in assets during 2008 (as seen on the chart above) and a significantly expanded geographical footprint, as Washington Mutual in particular added many physical branch locations.

Still cheap after the gains?

Before we answer that question, let’s take a quick look at why JPMorgan Chase & Co. (NYSE:JPM) had the opportunity to gain more than 65% over the past year. Just over a year ago, the company announced that a trade gone badly had produced losses of at least $2 billion, causing shares to plummet from the mid-40’s to the upper 20’s. While the total cost to exit this trade turned out to be around $6.2 billion, it is now in the past and the company has recovered nicely.

As a result, shares are now trading above their pre-crisis highs as the market is starting to realize that JPMorgan is just fine. Even after the recent gains, JPMorgan Chase & Co. (NYSE:JPM) still trades for just 9.7 times TTM earnings, well below their historical average (which is closer to 12). The company is projected to earn $5.71 per share this year, rising to $5.96 and $6.30 in 2014 and 2015, respectively. This implies a 3-year average forward earnings growth rate of 6.7%, which justifies a higher valuation than shares currently trade for.

Also worth considering is that JPMorgan pays a very healthy dividend yield of 2.8% annually, and has some of the strongest capital ratios of the industry, which should provide sufficient protection if the economic recovery stalls for whatever reason.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!