But in the long run, it will need better corporate governance to be a viable investment. Let’s face it, JPMorgan doesn’t have the best reputation. If it doesn’t take better care of its customers, employees, and itself, tough times will follow.
For competitive analysis of banks, a comparison of liquidity to capital positions is one of the best approaches to measure strength. In the first quarter, JP Morgan reported a Basel III Tier 1 common ratio of around 9%. This was inferior to Bank of America’s 9.52% but superior to the 8.9% Wells Fargo put in the books.
Looking at its loans to deposit ratio, JPMorgan Chase & Co. (NYSE:JPM) has a ratio of 0.54, while bank of America and Wells Fargo have 0.83 and 0.85, respectively. A ratio in proximity to one is usually considered best with regards to both profitability and liquidity position. JPMorgan’s .54 ratio means it has a lot of the cash sitting idle.
Despite recent strong financial results, JPMorgan needs to be held accountable for its latest debacles. Poor internal controls in risk management could be key drivers to the company’s downfall. JPMorgan needs to cut down on the mistakes to be a safer investment.
Red Chip has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, JPMorgan Chase & Co (NYSE:JPM), and Wells Fargo. Red is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article JPMorgan Continues to Make Mistakes originally appeared on Fool.com and is written by Red Chip.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.