How JPMorgan Chase Fits in the Busted Big Bank Boom

  • JPMorgan Chase (JPM) stock is down 18% in 2022.
  • A decline in deals hurt first quarter results.
  • When fintechs rise again, their king will lead the way.
JPM stock - How JPMorgan Chase Fits in the Busted Big Bank Boom

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JPMorgan Chase (NYSE:JPM) stock finally found its bottom on May 20. But it wasn’t supposed to be this way.

Throughout the pandemic investors were told that when money cost money again, money center banks would boom. Yet as interest rates rose through early 2022, JPMorgan stock fell like a tech stock. The peak was at nearly $178 in October. The recent low was a little over $117.

JPM stock recently was trading around $129.50. That’s a market cap of $380 billion, and a price to earnings ratio below 10.

Before you jump at the bargain, however, first ask why the analysis was so wrong.

Ticker Company Price
JPM JPMorgan Chase $130.24

Banks Are Not Immune

Supposedly, banks and financial technology or fintech companies have been competing for talent and investment. When money costs money, then, you buy banks that get their money from customers, rather than fintechs that rely on investors.

Turns out, banks are fintechs too.

Banks are no longer giant buildings, but apps. The difference between a JPMorgan banking app on your phone and one for SoFi Technologies (NASDAQ:SOFI) is branding. Banks like Morgan compete in the payments space. If you have an Amazon (NASDAQ:AMZN) credit card, you’re paying Morgan, which uses Chase as a consumer brand from strip mall storefronts.

Where the big banks are supposed to shine is in investment banking. During its first quarter, showing net income of nearly $8.3 billion, $2.63/share, on revenue of $30.7 billion, JP Morgan saw its investment banking fees drop 31%. There were fewer deals and thus less underwriting. Lending revenue rose 21%, and payments revenue 31%, but that didn’t offset the failures of the suits.

That may be why institutional investors recently voted down big pay raises for Dimon and his lieutenants. A Wells Fargo (NYSE:WFC) analyst asked if the bigger bank, which has $3 trillion in assets, had lost its fastball. Dimon was put on the defensive at his Investor Day with questions about trading losses.

Developers, Developers

The real stars at JPMorgan today are software developers, who recently got a raise and now want more. JPMorgan has 50,000 software developers on staff, who get $250,000/year and more to sit at home or they’ll jump to another bank, fintech or crypto firm.

The magic at Morgan isn’t being delivered by traders or dealmakers, but developers who are automating payments  for both consumers and businesses. When time is money, banks can make money by shortening time. Customers who once waited months to pay for hamburgers on their credit card are now being persuaded to send the cash instantly, and businesses are paying up for the faster service.

That’s why JPM stock has been acting like a tamer version of SoFi, just as Microsoft (NASDAQ:MSFT) stock mimics the movements of smaller software companies. JPMorgan is just a big fintech with more moving parts. This is the new argument of JPMorgan bulls, who see the bank rising with fintech’s recovery from its current depths.

The Bottom Line on JPM Stock

JPMorgan Chase is no longer the country’s biggest banking company by market cap. That would be Visa (NYSE:V). The credit card processor is worth $60 billion more than the big bank.

The point is that as money becomes magnetic ink, its absolute importance has declined. Software matters more than fast-talking guys in suits. Even on trading desks, the algorithms are worth more than the people deploying them.

This doesn’t mean you should sell JPM stock. On the contrary. The fall of fintech offers huge opportunities to get great software at a discount.

The deals that will make the difference for JPMorgan Chase aren’t those it arranges for others, but those it can make for itself. Money still makes kings, and it’s good to be the king.

On the date of publication, Dana Blankenhorn held long positions in AMZN, SOFI and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.


Article printed from InvestorPlace Media, https://investorplace.com/2022/05/jpm-stock-how-jpmorgan-chase-fits-in-busted-big-bank-boom/.

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