JPMorgan Chase & Co (JPM, Financial) is one of the world’s largest investment institutions, managing assets in excess of $2 trillion across its investment banking and financial business. Revenues have more than doubled since 2005, despite the shockwaves of the global banking crisis to bring JPM to a point where investors can again consider whether it represents a solid prospect for a longer term return on investment.
But with sovereign debt still causing more than its fair share of concern for those exposed internationally, can JPMorgan consider itself in a strong position? More importantly for investors, to what extent does the current climate support growth potential in an undermined industry still reverberating from the global downturn?
The Crunch: Global Banking in a Spin
When the U.S. housing bubble started to burst in 2006 to 2007, the implications for banking institutions worldwide were to be catastrophic. The collapse of Lehman Brothers (LEH, Financial) resulted in the largest bankruptcy filing the U.S. has ever seen, causing significant turmoil in markets worldwide. By 2008, Bear Stearns (BSC, Financial), another large investment outfit was experiencing similar difficulties, only to be picked up by JPMorgan at the height of the troubles for a snip at $240 million.
Today, the sector looks much different as banks look to consolidate their positions for future growth. While the industry is certainly not far from the woods yet, the prospects for a return to strength are as solid as they have been for a decade. While the hangovers of the banking crisis can still be felt, optimism amongst JPM investors is riding high, and the prospects for mid- to long-term growth may now be on the rise.
A Possible SEC Settlement
The role of Bear Stearns in packaging and reselling U.S. home loans is now JPMorgan’s problem, and there are suggestions that a resolution to the ongoing SEC investigation could be around the corner. This is anecdotally suggested as coming in shy of the Goldman Sachs settlement in 2010, but nevertheless will mark a costly line under the affair which will allow JPM to continue on a forward trajectory. While the baggage of the credit crisis is still weighing heavy on JPM and its share price (down from pre-crunch highs of around $47), the perceived recovery in U.S. housing and financial markets spells a potentially more significant growth trajectory for the bank in the coming weeks and months. A relative recovery in share price at JPM is mirrored with banks like BNP Paribas (FTSE:BNP.PA), which has witnessed a somewhat faltering return to stronger share price numbers.
Climate Care
While the financial markets will probably never be quite the same again, JPMorgan must now pursue growth avenues in a more diversified, broader field. Markets in emerging environmental sectors, for instance, could provide the levels of growth investors seek to deliver more persistent, safer returns. JPM’s investment in Climate Care in the carbon offsetting market shows a proactive approach to diversifying their portfolio. As global energy shifts ever more prominently into our collective focus, and the need for reducing the impact of consumers, businesses and governments on the environment becomes ever more pressing, appropriately priced investments in this sector should deliver a return over the medium term. Indeed, as has been seen with the high profile move of UPS (UPS) into the sector, this is an example of one area in which JP Morgan can be optimistic about the future of their portfolio.
The company’s move into consumer and small business banking in 2006 helped provide some degree of insulation against the global banking crisis, but going forward it will need to consider its approach to risk, particularly in its trading sectors to ensure it remains a credible operator with a strong growth outlook.
While the foundations of investment banking have arguably changed forever, the prospects for investment in JPMorgan today look more robust than has been the case in recent history. Fortunately for investors, there is plenty to smile about on the horizon as markets stabilize and JPMorgan continues to grow and develop its acquisitions base to strengthen results going forward. With the JPM stock on the rise, the future might look a little brighter for the old man of the markets.
But with sovereign debt still causing more than its fair share of concern for those exposed internationally, can JPMorgan consider itself in a strong position? More importantly for investors, to what extent does the current climate support growth potential in an undermined industry still reverberating from the global downturn?
The Crunch: Global Banking in a Spin
When the U.S. housing bubble started to burst in 2006 to 2007, the implications for banking institutions worldwide were to be catastrophic. The collapse of Lehman Brothers (LEH, Financial) resulted in the largest bankruptcy filing the U.S. has ever seen, causing significant turmoil in markets worldwide. By 2008, Bear Stearns (BSC, Financial), another large investment outfit was experiencing similar difficulties, only to be picked up by JPMorgan at the height of the troubles for a snip at $240 million.
Today, the sector looks much different as banks look to consolidate their positions for future growth. While the industry is certainly not far from the woods yet, the prospects for a return to strength are as solid as they have been for a decade. While the hangovers of the banking crisis can still be felt, optimism amongst JPM investors is riding high, and the prospects for mid- to long-term growth may now be on the rise.
A Possible SEC Settlement
The role of Bear Stearns in packaging and reselling U.S. home loans is now JPMorgan’s problem, and there are suggestions that a resolution to the ongoing SEC investigation could be around the corner. This is anecdotally suggested as coming in shy of the Goldman Sachs settlement in 2010, but nevertheless will mark a costly line under the affair which will allow JPM to continue on a forward trajectory. While the baggage of the credit crisis is still weighing heavy on JPM and its share price (down from pre-crunch highs of around $47), the perceived recovery in U.S. housing and financial markets spells a potentially more significant growth trajectory for the bank in the coming weeks and months. A relative recovery in share price at JPM is mirrored with banks like BNP Paribas (FTSE:BNP.PA), which has witnessed a somewhat faltering return to stronger share price numbers.
Climate Care
While the financial markets will probably never be quite the same again, JPMorgan must now pursue growth avenues in a more diversified, broader field. Markets in emerging environmental sectors, for instance, could provide the levels of growth investors seek to deliver more persistent, safer returns. JPM’s investment in Climate Care in the carbon offsetting market shows a proactive approach to diversifying their portfolio. As global energy shifts ever more prominently into our collective focus, and the need for reducing the impact of consumers, businesses and governments on the environment becomes ever more pressing, appropriately priced investments in this sector should deliver a return over the medium term. Indeed, as has been seen with the high profile move of UPS (UPS) into the sector, this is an example of one area in which JP Morgan can be optimistic about the future of their portfolio.
The company’s move into consumer and small business banking in 2006 helped provide some degree of insulation against the global banking crisis, but going forward it will need to consider its approach to risk, particularly in its trading sectors to ensure it remains a credible operator with a strong growth outlook.
While the foundations of investment banking have arguably changed forever, the prospects for investment in JPMorgan today look more robust than has been the case in recent history. Fortunately for investors, there is plenty to smile about on the horizon as markets stabilize and JPMorgan continues to grow and develop its acquisitions base to strengthen results going forward. With the JPM stock on the rise, the future might look a little brighter for the old man of the markets.
