JP Morgan caught my eye following the bankruptcy of Lehman Brothers in 2008. While large icons in the banking industry like Citibank ran for cover, JP Morgan stood tall among its peers. Like a true gentleman that knew it had prepared well for the coming storm.
One of the positive effects of a market crisis is that it brings to light bad practices of companies - heavy risk taking, shifting questionable assets, and loose controls among others. In my mind, only JP Morgan stood the test. Big thanks to its leader Jamie Dimon. While its peers concentrated on gaining profit after profit without giving much thought to risk management pre-Lehman times, Jamie concentrated on creating a "fortress balance sheet". He consolidated its operations with a focus on profitability but all the while with an eye on risk control on each of the bank's individual business lines. And his efforts were rewarded when the most serious financial crisis of our time hit the streets. Although JP Morgan also partook of the Troubled Asset Relief Program, a lifeline offered by the U.S. government to ailing banks, it was also FIRST to pay its loan back. Many in the industry guessed that JP Morgan only took the handout to avoid being put in the spotlight. (Imagine, all its peers are taking a loan from the government except them. That would draw a lot of attention to them and may attract the bureaucrats to audit them needlessly) . It was also the FIRST bank to raise its dividend payout to investors after the Lehman crisis.
But its stock price still took a hit in 2008, just like all the banks in the U.S.. Many institutional investors, controlled and regulated by their own internal policies, were forced to sell their bank stocks. So when JP Morgan was selling below 20, I knew in my heart it was an irresistible bargain. Unfortunately, I didn't have a brokerage account then. I just had it now and I'm buying at $28 - by all means still a bargain in my mind.
It is not immune to the industry's ills, however. Like its peers, the bank is plagued by weak consumer loans, exposure to the troubled European notes (though limited to only $15B), and low investment banking activities. All these are causing some strain on the bank's bottom line. Still, the bank reported $4.3billion in gains in the 3rd quarter ($1.02 per share) on the back of robust growth in commercial loans.
JP Morgan remains well-capitalized. It has enough resources to withstand another recession if it comes. Its leader, Jamie Dimon, has transformed the bank into the most integrated and well-managed financial powerhouse it is today, and his keen attention to detail and long-term strategic thinking will ensure that JP Morgan retains its pre-eminent status well into the future.
One of the positive effects of a market crisis is that it brings to light bad practices of companies - heavy risk taking, shifting questionable assets, and loose controls among others. In my mind, only JP Morgan stood the test. Big thanks to its leader Jamie Dimon. While its peers concentrated on gaining profit after profit without giving much thought to risk management pre-Lehman times, Jamie concentrated on creating a "fortress balance sheet". He consolidated its operations with a focus on profitability but all the while with an eye on risk control on each of the bank's individual business lines. And his efforts were rewarded when the most serious financial crisis of our time hit the streets. Although JP Morgan also partook of the Troubled Asset Relief Program, a lifeline offered by the U.S. government to ailing banks, it was also FIRST to pay its loan back. Many in the industry guessed that JP Morgan only took the handout to avoid being put in the spotlight. (Imagine, all its peers are taking a loan from the government except them. That would draw a lot of attention to them and may attract the bureaucrats to audit them needlessly) . It was also the FIRST bank to raise its dividend payout to investors after the Lehman crisis.
But its stock price still took a hit in 2008, just like all the banks in the U.S.. Many institutional investors, controlled and regulated by their own internal policies, were forced to sell their bank stocks. So when JP Morgan was selling below 20, I knew in my heart it was an irresistible bargain. Unfortunately, I didn't have a brokerage account then. I just had it now and I'm buying at $28 - by all means still a bargain in my mind.
It is not immune to the industry's ills, however. Like its peers, the bank is plagued by weak consumer loans, exposure to the troubled European notes (though limited to only $15B), and low investment banking activities. All these are causing some strain on the bank's bottom line. Still, the bank reported $4.3billion in gains in the 3rd quarter ($1.02 per share) on the back of robust growth in commercial loans.
JP Morgan remains well-capitalized. It has enough resources to withstand another recession if it comes. Its leader, Jamie Dimon, has transformed the bank into the most integrated and well-managed financial powerhouse it is today, and his keen attention to detail and long-term strategic thinking will ensure that JP Morgan retains its pre-eminent status well into the future.
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