The Remarkable Bright Spot at This Big Bank

JPMorgan Chase had a tough year compared to Bank of America and Citigroup, but it turns out its credit card business may give many investors reason to be happy.

Feb 27, 2014 at 7:00AM

One of the biggest banks has taken a beating in the media lately, but its consumers are showing with their wallets the bank's business is still booming.

JPMorgan Chase (NYSE:JPM) had a disastrous 2013. It was linked directly to Bernie Madoff, questions arose surrounding its hiring practices in China, and it reached a monumental $13 billion settlement from its mortgage practices. As a result, its net income fell by 16% on the year to $17.9 billion.

This was all while peers Bank of America (NYSE:BAC) and Citigroup (NYSE:C) -- which were the key examples for litigation issues and poor performance during the financial crisis -- saw a truly great year in 2013, as they saw profits rose by leaps and bounds thanks to improved business performance, fewer settlements, and lower losses:

Source: Company Investor Relations.

This has created a blemish on the record of Jamie Dimon, and caused many to question whether JPMorgan Chase should be considered as an investment. However, there is also no denying its core businesses performed quite well -- net income rose by 2.5% excluding the corporate line item -- and it turns out its largest business has one key opportunity for remarkably profitable growth.

The key business inside a business
When many people think of JPMorgan Chase, the first thought is often visions of grandiose investment bankers roaming the streets of New York City making deals worth hundreds of millions.

However, 45% of its core net income came from its Consumer and Community Banking, or CBB, business, versus 41% at Bank of America and 42% at Citigroup. Although it has a major presence in investment, corporate, and commercial banking, lending to small businesses and individuals is a greater driver of income for JPMorgan Chase than many believe.


And while its CBB line of business encompasses a variety of different segments, the Card Services business is the most intriguing and perhaps the greatest driver of profit moving forward.

Last year the CBB delivered a return on equity of 26%, yet its card services operations had a staggering 34% ROE. Card Services opened more than 7.3 million new accounts (up from 6.7 million last year) and saw its total sales volume rise 10% to $420 billion. Perhaps even most remarkable was the growth of the pre-tax income for the business, which rose 33% to $5.3 billion as a result of fewer charge-offs and expenses.

Yet perhaps even more remarkable is how well JPMorgan Chase performed against other peers, such as the aforementioned Bank of America and Citigroup, but also credit card giants American Express (NYSE:AXP) and Capital One (NYSE:COF). It was able to clearly outpace them in sales volume growth and also maintain its hold on the No. 2 spot in total credit card spending volume:

Source: JPMorgan Chase Annual Shareholder Meeting. 

In addition to aggregate growth, what was also striking was JPMorgan Chase's commanding grip on the market share of affluent customers -- those with more than $125,000 in annual income or $250,000 in total assets -- which are often the most profitable and pose the least amount of risk:


Credit Card Consideration

Primary Credit Card

JPMorgan Chase



American Express






Capital One






Bank of America



Source: JPMorgan Chase Annual Shareholder Meeting.

The credit card business for JPMorgan Chase is a distinct bright spot, and while it delivered impressive growth in 2013, it appears it is clearly in position to do so for years to come.

The Foolish bottom line
Understanding a bank with more than $2.4 trillion in assets goes beyond the success of just one business, but in the case of JPMorgan Chase, the success of its credit card business is both remarkable and noteworthy, and something any prospective investor should always keep in mind.

The banking revolution
Do you hate your bank? If you're like most Americans, probably so. While that's not great news for consumers, it certainly creates opportunity for savvy investors. That's because there's a brand-new company that's revolutionizing banking and is poised to kill the traditional brick-and-mortar banking model. And amazingly, despite its rapid growth, this company is still flying under Wall Street's radar. For the name and details on this company, click here to access our new special free report.

Patrick Morris owns shares of Bank of America. The Motley Fool recommends American Express and Bank of America and owns shares of Bank of America, Capital One Financial, Citigroup, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers