Among all of the hoopla in the last few years about big banks, something that seems to be getting lost in the shuffle is, a few “big banks” are actually doing pretty well. In fact, I would argue that many of the big banks represent good values at the current time. Though JPMorgan Chase & Co. (NYSE:JPM) has been put through the wringer over its trading practices, there are at least five solid reasons to consider buying the stock.
Stronger, higher, better
In order to find winning investments, not only do you have to discover a company that could do well, but I think it makes perfect sense to compare the company to their peers. Peter Lynch used to say that some of his best investments came from researching one company, then finding that he liked one of their competitors better.
In the big bank sector, it’s pretty easy to identify the biggest names. Along with companies like JPMorgan, I would include Bank of America Corp (NYSE:BAC), Wells Fargo & Co (NYSE:WFC), and Citigroup Inc (NYSE:C). If I had a nickel for every time one of these banks was brought up in the “too big to fail” conversation, I could probably buy one of these institutions outright.
When I compare these companies recent earnings, the adjectives to describe JPMorgan Chase & Co. (NYSE:JPM) are words like stronger, higher, and better. Investing isn’t always that difficult: find the strongest institution among a group and buy that stock.
Strongest in deposit growth, loans represent an opportunity
The first reason to buy JPMorgan is they are showing stronger deposit growth than their peers. In fact, in the last three months, the company saw period end deposits increase by 7%. By comparison, Wells Fargo & Co (NYSE:WFC) came in a close second with a 6.36% growth rate, Bank of America Corp (NYSE:BAC) saw an increase of 4.38%, and Citigroup Inc (NYSE:C) grew deposits by 3%. For all the talk about customers leaving big banks, the money is flowing into JPMorgan.
A second reason to consider the stock is, the huge opportunity in front of the bank if they can turn around their real estate loans. On an overall basis, the company saw loans up 1%. This performance was better than Bank of America Corp (NYSE:BAC) with loans down 0.84%, but lagged Wells Fargo’s increase of 3.84%, and Citigroup’s increase of 5%.
However, JPMorgan’s total loans were dragged down by the company’s real estate dealings, where mortgage loans dropped 7.54%, and home equity loans decreased 12.31%. Considering that business loans were up 6%, commercial banking loans increased 14%, and asset management loans were up 35%, imagine the company’s overall performance if they could just show small growth in the real estate portfolio.