An Interesting Comparison of Bank of America to JPMorgan Chase

If you want to understand Bank of America (BAC 1.49%) and JPMorgan Chase (JPM 0.65%), or any bank for that matter, then you need a sense for the type of loans they hold in their portfolios. Perhaps more than anything else, a bank's loans shine a revealing light on the way it makes money.

With respect to JPMorgan Chase and Bank of America, there are two general points that stick out when you compare their otherwise similarly sized loan portfolios, the components of which are broken down in the following table:

*Includes smaller categories of commercial loans as well. Data source: Bank of America and JPMorgan Chase.

The first is that JPMorgan Chase has a larger consumer loan portfolio than Bank of America does, at $476 billion and $456 billion, respectively. This is surprising when you consider that JPMorgan Chase is, on balance, a Wall Street company, whereas Bank of America has long been known as a retail-oriented bank.

JPMorgan's consumer loan portfolio is larger because it has a bigger credit card portfolio -- and the difference isn't negligible. At the end of last year, its $131 billion in credit card loans was 32% larger than Bank of America's $99 billion portfolio.

Aside from home equity loans, where Bank of America has a 20% lead over JPMorgan Chase, the other consumer loan categories are roughly equivalent. This includes residential first mortgages and general consumer loans -- things like car loans as well as margin loans in brokerage accounts.

Data source: Bank of America and JPMorgan Chase. Chart by author. As of Dec. 31, 2015.

On the commercial side, by contrast, Bank of America's loan portfolio is nearly a quarter (24%) larger than JPMorgan Chase's. And if you break their commercial portfolios down further, the differences become even more apparent.

Bank of America has a commanding lead with respect to general commercial loans (C&I loans and others). It held $390 billion worth of these loans at the end of last year compared to JPMorgan Chase's $224 billion. Suffice it to say, this is why Bank of America is on top when it comes to commercial loans more generally.

The roles are reversed, though, when you look at commercial real estate loans. JPMorgan Chase dominates in this category, with $95 billion in loans compared to Bank of America's $57 billion. On top of this, JPMorgan Chase also has a substantial portfolio of loans to financial companies -- likely as a result of its correspondent banking business combined with money lent to brokerages and institutional investors, such as hedge funds.

Taken together, these comparisons show that it's wrong to think of JPMorgan Chase as primarily a commercial bank, given that it has a larger consumer loan portfolio than Bank of America. It also shows that it's wrong to think about Bank of America as primarily a retail bank, as its commercial and consumer loan portfolios are equivalently sized.