Most people think America faces a banking crisis that could bring down the entire economy. Consequently, some investors are dumping bank stocks such as JPM.
People fear a banking crisis because of the Silicon Valley Bank collapse. For example, analysts estimate consumers spent less in the weeks after the Silicon Valley Bank debacle went viral. In particular, March 2023 new business loans fell to the lowest level since 2021, the Federal Reserve estimates.
America faces a slowdown in economic activity that could lead to a recession, EY Parthenon Chief Economist Gregory Daco speculates. Banking woes such as the near collapse of Credit Swiss drive such fears.
Are Monster Banks Immune to the Banking Crisis?
One way to detect a banking crisis and a slowdown is to examine America’s largest commercial bank JPMorgan Chase & Co (NYSE: JPM).
Chase is an excellent barometer for the US economy because it operates 4,791 domestic branches, the Federal Reserve reports. JPMorgan had $3.202 trillion in consolidated assets and $2.481 trillion in domestic assets in December 2022, the Federal Reserve estimates.
Additionally, Chase is the fifth-largest bank worldwide by total assets and the largest US bank totally assets, Statista estimates.
Interestingly, Chase & Co is experiencing incredible growth. Stockrow estimates Chase’s revenues grew by 68.96% in the quarter ending on 31 March 2023. In contrast, Chase’s revenues shrank by -3.88% in the quarter ending on 31 March 2022.
Intriguingly, Stockrow credits Chase with three quarters of double-digit revenue growth. For instance, the revenues grew by 31.54% in the quarter ending on 30 September 2022 and 54.55% in the quarter ending on 31 December 2022.
JPMorgan Chase’s Dramatic Growth
Chase (JPM) is growing but is it making more money? The answer is yes. Chase’s quarterly operating income grew from $10.063 billion on 31 March 2022 to $15.967 billion on 31 March 2023.
Similarly, Chase’s quarterly gross profit grew from $30.717 billion on 31 March 2022 to $38.349 billion on 31 March 2023. Thus, Chase’s quarterly gross profit grew by $7.63 billion in a year.
Dramatically, Chase’s quarterly revenues grew from $32.341 billion on 31 March 2022 to $54.642 billion on March 2023. Hence, Chase’s quarterly revenues grew by $22.301 billion in a year.
Consequently, many people will wonder if Chase is a growth stock. The financial numbers show JPMorgan Chase is a growth stock.
How Much Money is JPMorgan (JPM) making?
Interestingly, JPMorgan Chase did not report cash flow numbers on 31 March 2023. Instead, the newest cash-flow numbers I could find for Chase were from 31 December 2022.
Notably, Chase’s quarterly operating flow fluctuates dramatically. For example, the quarterly operating cash flow fell from $29.094 billion on 30 September 2022 to $10.098 billion on 31 December 2022. Conversely, that cash flow grew from $1.652 billion on 30 June 2022 and $2.507 billion on 31 December 2021.
Yet Chase can generate incredible amounts of cash. It reported a quarterly operating cash flow of $58.979 billion on 31 March 2022. Similarly, Chase reported a quarterly ending cash flow of $754.532 billion on 31 March 2022. However, the quarterly ending cash flow fell to -$76.953 billion on 31 December 2022.
In contrast, Chase reported an investing cash flow of $39.594 billion on 31 December 2022. The quarterly investing cash flow rose from $11.163 billion on 30 June 2022 and -$7.776 billion on 30 September 2022.
How Much Debt is Chase (JPM) Accumulating?
Chase (JPM) borrows heavily and pays off enormous amounts of debt. For example, Chase reported a quarterly financing cash flow of $132.722 billion on 31 March 2022. Conversely, the quarterly financing cash flow fell to -$142.344 billion on 31 December 2022.
Appealingly, Chase has far less debt. For example, the total debt fell from $576.24 billion on 31 December 2022 to $295.489 billion on 31 March 2023. Thus, Chase has growing revenues and falling debts, which is good.
Moreover, Chase is a cash-rich company that has less cash. The cash and short-term investments fell from $1.568 trillion on 31 March 2022 to $1.442 trillion on 31 March 2023. In contrast, the cash and short-term investments grew from $1.337 trillion on 31 December 2022.
Thus, Chase came through the first-quarter of 2023 banking crisis with less debt and more cash. I think that makes Chase a value investment.
What Value Does JPMorgan Chase (JPM) offer?
JPMorgan Chase (JPM) lost some value over the past year. For example, the total assets fell from $3.955 trillion on 31 March 2022 to $3.744 trillion on 31 March 2023.
In contrast, JPMorgan’s share price rose from $128.46 on 18 April 2022 to $141.22 on 19 April 2023. Moreover, Mr. Market thinks Chase has recovered from the banking crisis. To elaborate, Chase’s share price hit a high of $143.66 on 3 March 2023 before falling to a low of $124.91 on 24 March 2023.
The stock price shows investors think the banking crisis is not affecting JPMorgan Chase. Instead, the nation’s biggest bank appears to be immune to the banking crisis.
The Value Case for JPMorgan Chase (JPM)
I can make a three-fold value case for JPMorgan Chase (NYSE: JPM). First, Chase’s customer base is far larger and more diverse than most US banks.
Chase claimed to serve over 60 million US households in 48 states and the District of Columbia in 2021. This makes Chase a diversified institution with lower risks than regional or specialist banks. For example, Chase has less exposure to volatile regions, such as Silicon Valley. Moreover, Chase is not dependant on one industry as Silicon Valley Bank was.
Second, Chase’s underlying business consumer banking is growing. For example, cash balances in checking accounts are rising, Chase’s Household Pulse estimates. The Household Pulse estimates average checking-account cash balances grew by 11% between the second quarter of 2019 and the second quarter of 2022.
“At the end of June 2022, median cash balances were 60% elevated for low-income families, compared to 45% elevated for high-income families,” Chase claims. Hence, Chase’s diversified business grows because it serves both low and higher-income customers.
How Chase Profits from Social Security
Second government benefits, such as Social Security payments, give Chase (NYSE: JPM) give Chase a stable and growing stream of cash the market does not affect.
To explain, the federal government deposits Social Security payments in bank accounts each month, no matter what the stock market does. Moreover, Uncle Sam cannot run out of money even if the Social Security trust fund does. To elaborate, Congress can always raise taxes or borrow money to fund Social Security.
For example, 70.862 million Americans received Social Security payments in February 2023, the Social Security Administration estimates. The Social Security Administration pays over $1 trillion in benefits a year.
The average Social Security retirement benefit was $1,825 a month and the typical Social Security Disability payment was $1,483 a month. Retired workers received $88.7 billion from Social Security in December 2022. Disabled people received $11.3 billion from Social Security in December 2022.
Hence, Chase could receive tens of billions in Social Security payments each month. That business will grow because America is aging. For example, the number of Americans over 65 could grow from 52 million in 2018 to 95 million in 2060, the Population Research Bureau projects.
How the FDIC adds Value to Chase
The third value asset at JPMorgan Chase (JPM) is the Federal Deposit Insurance Corporation (FDIC).
The FDIC insures most bank accounts up to $250,000. Hence, the FDIC insurances most checking accounts. For example, Chase estimates the average high-income family’s checking account contained $24,813 in the second quarter of 2022. Thus, the FDIC insures most of Chase’s depositors.
Furthermore, FDIC insurance is expanding. For example, the FDIC now will insure trust accounts up to $1.25 million beginning on 1 April 2024. Furthermore, the FDIC guaranteed all deposits, regardless of size, at Silicon Valley Bank on 13 March 2023.
I think the FDIC’s action effectively expands deposit insurance to all commercial bank accounts. Although I think the FDIC will not admit that. Hence, the FDIC makes JPMorgan Chase a safer investment by assuming most of its risks.
A Safe Dividend Stock
In conclusion, I think JPMorgan (JPM) is a safe and fairly priced value investment. Appealingly, JPM is a value investment that pays a terrific dividend.
For example, JPMorgan Chase scheduled nine $1 quarterly dividends between 30 April 2023 and 30 April 2025. Overall, JPMorgan shares offered a $4 forward dividend and a 2.83% forward dividend yield on 18 April 2023.
I think JPMorgan Chase’s financial numbers show America’s economy is stable. Moreover, I believe those numbers show the banking crisis is not affecting JPMorgan Chase & Company. Thus, Chase is a value investment in banking with a safe dividend.