JPMorgan Chase (JPM 0.49%) is America's largest bank. It is good at just about every aspect of banking, has one of the most esteemed CEOs in Jamie Dimon, and trades at a high valuation. Its continued success may have investors wondering: What's next? How will the bank continue to grow and deliver strong returns when it's already doing so well?
One reason that I believe JPMorgan still has plenty of growth ahead of it is its current retail expansion, which is now more than halfway through its five-year plan and off to a very promising start.
Growing through bricks and mortar
In 2018, JPMorgan announced a $20 billion investment that would add 400 branches in new markets over a five-year period. It may be hard to believe, considering JPMorgan has more than $3 trillion in assets, but at the time, the bank didn't have a single retail branch in major cities like Boston, Philadelphia, and Washington, D.C. This goes to show that as big as JPMorgan is, there is also still a good chunk of the country it has yet to penetrate.
Image source: JPMorgan Chase.
It seemed a bit odd that JPMorgan wanted to add so many branches when most banks are eliminating them, but the plan was less about adding square footage and more about gaining a foothold in markets where the bank can do well.
Thus far, the numbers show a very promising start. The bank has launched 230 of its planned 400 branches and said it would be in all 48 contiguous states by the end of summer. CFO Jeremy Barnum said on JPMorgan's second-quarter earnings call that the branch plan so far has exceeded expectations, bringing in more than $7 billion of deposits and investments.
With recent FDIC deposit data, we can look at the bank's deposit growth by metropolitan statistical area (MSA) between June 30, 2020, and the same day of this year. Looking at a number of the new MSAs that JPMorgan has launched a retail presence in, it's clear the bank is off to a good start.
| Metropolitan Statistical Area | Total Deposits (millions) (6/30/2021) | Growth Rate From 2020 |
|---|---|---|
| Charlotte-Concord-Gastonia, N.C.-S.C. | $132 | 1,971% |
| Durham-Chapel Hill, N.C. | $263 | 94% |
| Greenville-Anderson, S.C. | $106 | 199% |
| Kansas City, Mo.-Kan. | $139 | 181% |
| Minneapolis-St. Paul-Bloomington, Minn.-Wis. | $275 | 134% |
| Nashville-Davidson--Murfreesboro--Franklin, Tenn. | $232 | 227% |
| Pittsburgh, Pa. | $139 | 290% |
| Providence-Warwick, R.I.-Mass. | $93 | 100% |
| St. Louis, Mo.-Ill. | $210 | 169% |
| Baltimore-Columbia-Towson, Md. | $154 | 233% |
| Boston-Cambridge-Newton, Mass.-N.H. | $1,300 | 103% |
| Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md. | $1,200 | 109% |
| Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.Va. | $1,700 | 81% |
Source: FDIC
Now, some of those growth rates are obviously huge considering these branches are new and growing fairly quickly, but if you look at some of the MSAs where branches were launched in 2018 and 2019, such as Boston, Philly, and the greater D.C. area, they've each amassed more than $1 billion in deposits with the latter closing in on $2 billion. In Massachusetts, JPMorgan led all banks in terms of deposit growth over the past year.
Lots of growth ahead
Despite its massive size and strong performance -- after growing 24% this year, its ratio of price to tangible book value is 2.3 -- JPMorgan is capable of continuing to grow. There are still many areas in the U.S. and all over the world where the bank has not expanded. I would also expect that this retail expansion will be useful in growing the bank's business banking and asset and wealth management franchises as well.
Ultimately, the success in its branch expansion plan is just one reason I believe JPMorgan can continue to grow and produce strong returns for shareholders.
