As the largest bank in the U.S., with more than $3.3 trillion in assets, JPMorgan Chase (JPM 1.41%) may be hard to fathom as a candidate for continuing growth. But the bank has lots of opportunities to expand geographically and within its various business lines. In fact, the bank announced back in January that it plans to increase its investments in its operations from $10 billion in 2020 to roughly $12.4 billion this year.
JPMorgan CFO Jennifer Piepszak spoke about those investments in a little more detail at the recent Credit Suisse Financial Services Forum. Let's take a look at what Piepszak said and dig into JPMorgan's growth areas.
1. Market expansion in the U.S.
A few years ago, JPMorgan began launching retail branches in cities and markets in the U.S. where it didn't have a brick-and-mortar presence. It may surprise you to know that up until a few years ago, the largest bank in the U.S. didn't have a single retail branch in major U.S. cities like Boston, Pittsburgh, the District of Columbia, and Philadelphia. Expansion in these cities has already been successful, with JPMorgan quickly building up strong deposit balances at many of its new branches.
Piepszak said the bank expects to be in all of the lower 48 U.S. states soon, and I imagine the bank will keep bulking up its retail presence where it sees opportunities. Although most banks are shrinking their branch footprints, a right-sized branch can create a lot of value for a bank by bringing in new deposits and new banking relationships with consumers and businesses. Piepszak said that adding a physical branch presence in new states enables the bank to bring in business it couldn't have otherwise.
2. Wealth management
JPMorgan Chase's asset and wealth management division had a great year in 2020. The unit, which has more than $2.7 trillion in assets under management, generated $14.2 billion in total revenue and delivered a 28% return on equity in 2020. But Piepszak believes the unit, particularly the wealth management segment, is capable of so much more with its existing clients. She noted that JPMorgan serves 50% of households with a net worth between $1 million and $10 million, yet only 5% of those customers invest with JPMorgan.
3. Asset management
Although JPMorgan reports its asset and wealth management in one division, they are two separate business operations. Wealth management focuses on an individual or family's overall financial well-being through services such as retirement planning, tax planning, insurance, and more. Meanwhile, asset management is more focused on clients strictly investing money in stocks, bonds, mutual funds, and other financial instruments to grow wealth, although the lines between wealth and asset management can certainly get blurry at times.
In recent years, as the industry has dealt with higher expenses and lower management fees, the asset management industry has become ripe for consolidation to add scale. JPMorgan CEO Jamie Dimon has not been shy about wanting to participate in that consolidation, so look for the bank to grow its asset management business to essentially make it more efficient and profitable within the bank.
4. Wholesale payments
Piepszak said she sees opportunities in the bank's consumer and wholesale payments businesses. Wholesale payments include merchant services, which offers merchants payment-processing capabilities including fraud and risk management and data and analytics. Through merchant services, businesses of all sizes can accept payments via credit and debit cards and payments in multiple currencies. Wholesale payments also includes treasury services, which help businesses manage their transactions, investments, and information services. Obviously, these are all services for businesses, so branch expansion in the U.S. and global growth will bring in new business clients to the bank that can help further fuel this business line.
5. Consumer payments
A few months ago, JPMorgan acquired several parts of a private company called cxLoyalty, including the company's tech platforms, travel agency, gift card, and points businesses. It seems like a weird time to be buying a travel loyalty credit card program, but the bank obviously believes travel will soon rebound. JPMorgan is one of the largest issuers of credit cards. By owning the travel rewards companies, it will be able to offer existing and new credit card holders special deals related to travel.
China is beginning to ease some of its trading and banking restrictions as it looks to encourage more foreign investment in the country. In June of last year, the China Securities Regulatory Commission ruled that JPMorgan could fully own and operate a futures subsidiary in China, making it the first completely foreign-owned futures business in the country. JPMorgan is looking to do something similar in China with wealth management as well. Wading further into one of the world's largest economies is sure to provide plenty of growth opportunities for JPMorgan.