Stock return since Jamie Dimon became CEO
Source: YCharts
Jamie Dimon became the CEO of JPMorgan Chase & Co. (NYSE:JPM) in 2005. He has done an excellent job of leading and managing the bank over the tenure of his leadership. The stock has appreciated 39.33% since 2005. In comparison, Bank of America Corp (NYSE:BAC) shares have lost 73.31% and Citigroup Inc (NYSE:C) has declined 89.49% over the same period.
What has been different about JPMorgan? In summary, it’s the leadership. The company’s CEO has done an excellent job of managing risk and diversifying the business. Up until 2007, banks were going all-in on housing. JPMorgan Chase & Co. (NYSE:JPM) continued to diversify its business activities by focusing on a broad range of fee income. The banking division didn’t represent a substantial percentage of JPMorgan’s earnings at the time, and it still doesn’t to this day. This is how JPMorgan Chase & Co. (NYSE:JPM) was able to avoid the housing collapse.
Source: JPMorgan Chase
The company operates in five different business segments: Consumer & Banking, Corporate & Investment Bank, Commercial Banking, Asset Management, along with Corporate/Private Equity. Consumer banking represented 40% of the company’s revenue in the first quarter of 2013.
The consumer banking division grew in size due to the acquisition of Washington Mutual. The Washington Mutual acquisition in 2008 resulted in the number of banking branches to increase from 3,151 in Q4 2007 to 5,467 in Q4 2008. The number of checking accounts nearly doubled from 10.8 million in the fourth quarter of 2007 to 24.5 million in the fourth quarter of 2008. JPMorgan Chase & Co. (NYSE:JPM)’s consumer and community banking business nearly doubled in size after its acquisition of Washington Mutual bank. After the acquisition, every Washington Mutual branch was converted into a Chase Bank.
JPMorgan is the best at risk management
Despite the London Whale incident that resulted in a $6 billion loss last year, the company’s performance over the long-term has been fairly admirable when compared to other banks. Therefore, I find it highly unlikely that Jamie Dimon will be dismissed as Chairman. Jamie Dimon has been able to turn the consumer lending division into a profitable entity despite the acquisition of Washington Mutual. In fact, in its first-quarter 2013 earnings report, the consumer banking division generated $2.5 billion in net income.
Jamie Dimon has done a praiseworthy job of turning around the consumer banking business and has been able to grow its entire fee driven businesses over the past five years. Jamie Dimon has also improved the net income margin of JPMorgan Chase & Co. (NYSE:JPM) from 10.21% in the first quarter of 2005 to 23.82% in the first quarter of 2013. During Dimon’s tenure, the bank has been able to double its net profitability, which means that the business has been well managed.
