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JPMorgan Chase (NYSE:JPM) is America's biggest bank with more than $2.5 trillion in assets on its balance sheet. But it's also one of the oldest, as its history dates back to 1799 when future Vice President Aaron Burr founded The Bank of The Manhattan Co.
But of course, its principal influence was, J.P. Morgan & Co., which was established in 1871 and would later become "the most powerful investment bank in the world," and its founder, J. Pierpont Morgan, was "known for his integrity and judgment" and remains "one of history's most influential and powerful bankers."
And while the bank has undergone much change from the time it was established -- more than 1,200 institutions have come together throughout its history to form what it is today -- JPMorgan Chase has remained rooted in American business, and this has been to the benefit of its investors, customers, employees, and even the larger world.
While it has an immense history, it is important to note the biggest changes at JPMorgan Chase -- and the entire banking industry -- did not truly begin until the early 1990s as federal regulations changed.
But since then, JPMorgan Chase has delivered incredible returns to its shareholders, not only beating out fellow big-banking peers Bank of America (NYSE:BAC) and Citigroup (NYSE:C), but also the broader market, and even Warren Buffett's Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B):
That's enough about the past -- remember regulators require investors to always be told "past performance does not necessarily predict future results" -- and it's time to consider the future as well.
To start, it's critical to know at the end of 2013 the bank had leading positions in nearly all the markets and businesses it finds itself in.
Whether it's things from its customer and community banking unit -- the largest ATM network, issuing the second most mortgages in the country, providing the most credit card loans, and being the largest small business lender -- to its corporate bank as the second largest in global equity banking, and the leading middle market lender -- JPMorgan Chase has dominant positions.
And that is to say nothing of the fact it has the following rankings in its asset management group:
- No. 1 Institutional Money Market Fund Manager Worldwide
- No. 1 Ultra-High-Net-Worth Global Private Bank
- No. 1 U.S. Mid Cap Value Equity Manager of the Year
- No. 1 U.S. Real Estate Money Manager
- No. 2 Hedge Fund Manager
All of this is to say, it is clearly a market leader.
But of course, it isn't just a market leader because it holds dominant positions, but it also delivers strong results, and after excluding for legal expenses, it has provided a remarkably high return on tangible common equity of 15% each of the last four years.
Yet it would be a mistake for investors to not address the legal expenses, which totaled nearly $15 billion in 2012 and 2013. It has certainly had an illustrious history, but both it and the companies it acquired in 2008 before the financial meltdown -- Bear Stearns and Washington Mutual in 2008 -- had their fair share of misgivings during the financial crisis.
Say what you will about the past and the discouraging results -- JPMorgan Chase saw its net income fall by nearly 70%, or $10 billion in 2008 -- but investors should take confidence knowing when the $13 billion settlement was reached in November of last year, CEO Jamie Dimon said in the press release that the "settlement covers a very significant portion of legacy ... issues for JPMorgan Chase," meaning that the worst seems to be behind it.
And 2014 is shaping up to be another solid year for JPMorgan Chase:
While it may be trailing Wells Fargo (NYSE:WFC) in some of the key performance metrics, the reality is it currently trades at such a reasonable and compelling valuation with a price-to-tangible book value multiple sitting at 1.4 versus the 1.8 average among its peers, it undeniably sits at a very reasonable price.
Considering that Warren Buffett once told us that it is "far better to buy a wonderful business at a fair price than to buy a fair business at a wonderful price," the strong results and compelling price of JPMorgan Chase are undoubtedly enticing to investors.
But it's important to see that it isn't just its investors who are happy with it, but also its customers.
In each of the last two years it has held the top spot among the largest banks in customer satisfaction, according to the American Customer Satisfaction Index by J.D. Power and Associates.
And it wasn't just its retail customers who are happy with it, but its business relationships as well. In 2013 it also received the highest ranking from J.D. Power in small business customer satisfaction across the West, Midwest, and the South, spanning more than 40 states.
With all that in mind, it's no wonder almost half of the households in America and nearly 80% of the companies that make up the Fortune 500 have a relationship with JPMorgan Chase. And knowing Warren Buffett has spoken to how keeping customers happy can keep investors happy, it's all starting to make sense.
It's important to see the advantages JPMorgan Chase offers don't simply extend to investors and customers, but also employees as well.
Starting at the top, there is the most well-known employee of JPMorgan Chase, CEO Dimon, who recently revealed that he has been diagnosed with throat cancer. Yet he was upbeat in the internal company letter about it -- noting "the prognosis from my doctors is excellent" -- and concluded by saying: "I appreciate your support and want to thank our employees for the amazing work they do day-in and day-out. I'm very proud to be part of this company and honored to be working with such an exceptional group of people."
And it turns out that his respect and appreciation are mutual, as both JPMorgan Chase and Dimon sit at the top of the big bank rankings on Glassdoor:
Although he isn't an employee, it's also important to see Warren Buffett hasn't been shy to heap acclaim on Dimon. When a controversy surrounding Dimon's pay grabbed headlines in January, The Wall Street Journal reports that Buffett noted: "If I owned J.P. Morgan Chase, he would be running it and he would be making more money than the directors are paying him ... if Jamie decides he wants to make more money, all he has to do is call me and I'd hire him at Berkshire."
The larger world
But if all that wasn't enough, there's also the fact JPMorgan Chase has committed to providing extensive benefits to the broader world. Last year alone it provided nearly $2.7 billion in community development loans and investments, and gave nearly $7 million in grants to nonprofits.
It also launched its "New Skills at Work" program, a $250 million commitment to create a "five-year workforce development initiative aimed at helping close the skills gap around the world."
And this is to say nothing of the fact that it has been an active supporter of the "100,000 Jobs Mission", which hired nearly 120,000 veterans -- of which JPMorgan hired 6,300 since 2011 -- and doubled its commitment to now seek to hire 200,000 by 2020.
Clearly, it is committed to the larger world beyond just those closest to it.
The final thought
It must be restated, but it is important to note, that JPMorgan Chase is not immune from the troubles which have assailed the banking industry in recent years. However, it has continually achieved its stated efforts to be a "first-class business in a first-class way," and to that end, it should be applauded.