J.P. MORGAN CHASE & CO. $66(New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 3.7 billion; Market cap: $244.2 billion; Price-to-sales ratio: 2.6; Dividend yield: 2.7%; TSINetwork Rating: Average; www.jpmorgan chase.com) has four main divisions: Consumer and Community Banking, which includes branches and credit cards (45% of 2014 revenue, 44% of earnings); Corporate and Investment Banking, including brokerage and underwriting services (36%, 33%); Asset Management (12%, 10%); and Commercial Banking (7%, 13%). About 75% of Morgan’s revenue comes from the U.S.
The bank is selling some operations and scaling back in other areas. These moves are in response to the Federal Reserve’s plan to impose tougher capital requirements on banks it feels are too big or complex.
For example, it recently agreed to sell its Canadian credit card businesses to Bank of Nova Scotia (Toronto symbol BNS).
Morgan didn’t reveal the price, but these operations have about $1.3 billion in receivables and 2 million customer accounts.
As of September 30, 2015, the bank had $2.4 trillion of assets, down 4.3% from a year earlier. These sales cut Morgan’s revenue by 6.4% in the third quarter of 2015, to $23.5 billion from $25.1 billion. Lower revenue from securities trading and wealth management also hurt cut that total.
Overall earnings jumped 22.3%, to $6.8 billion from $5.7 billion, while per-share profits rose 24.4%, to $1.68 from $1.35, on fewer shares outstanding.
However, these gains were mainly due to a one-time $2.2- billion tax benefit. Excluding all unusual items, the bank earned $1.32 a share in the latest quarter. Morgan set aside $682 million to cover bad loans, down 9.9% from $757 million a year earlier. That’s because rising home prices are prompting fewer borrowers to default on their mortgages.
The bank continues to make progress with its plan to close branches as more of its customers do their banking online. It’s also laying off workers and cutting other costs. In all, these actions should lower its annual expenses by $4.8 billion by the end of 2017. The stock has gained 12% in the past year and now trades at 11.1 times Morgan’s expected 2015 earnings of $5.96 a share. The $1.76 dividend yields 2.7%.
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