JP Morgan Chase and Co.

Competitive Analysis within the Financial/Banking Industry

By Rida Javed

Dr. Yao Zhao

Business Intelligence and Benchmarking

Agenda

• I will be analyzing the financial industry, particularly the banking industry and its enterprises

• Banking is an industry, within financials, that deals with financial transactions, cash, and credit

• The main enterprise I will be analyzing is JP Morgan Chase and Co.

• JP Morgan Chase and Co. is one of the more prominent enterprises that generate a high amount of revenue within the industry
  

JP Morgan Chase and Co.

•  JP Morgan Chase & Co. is a multinational investment bank, while also being a financial services holding company

• The company has its headquarters in New York City, and it is one of the highest performing firms in the area

• Overall, JP Morgan is the seventh-largest bank in the world in terms of assets

• It has approximately 3.123 trillion dollars worth of assets

  
  

• Some of the services that JP Morgan provides are

• Investment banking

• Commercial banking

• Consumer banking

• Asset management for individuals, institutions, corporations, and even governments of countries

Business Intelligence and Competitive Analysis

• My overall analysis of the financial/banking industry will be based on 

• Industry analysis

• Competitive positioning

• Enterprise Diagnosis
  

  
  

Industry Analysis/Overview

Geographic Information, Concentration and Competition Intensity

Enterprise Distribution

• The banking industry, within the financial industry, there are 19 enterprises within the US

• The three states with the most amount of enterprises are

• California

• New York

• Ohio

Typical Performance By Region

• Even though California, Ohio, and New York have the same amount of enterprises, the firms in New York generate the most amount of revenue 

• After New York, the firms in North Carolina generate a considerable amount of revenue in comparison to other states

• Even though Minnesota and Pennsylvania do not have the most amount of firms, they also generate a significant amount of revenue

Concentration and Competition Intensity

• The financial/banking industry over recent years has been dominated by a few large firms

• Those firms are

• JP Morgan Chase & Co.

• Wells Fargo

• Bank of America Corp.

• Citigroup Inc.

• This shows how the financial/banking industry is relatively concentrated

• Even though Citigroup was the most prominent enterprise in 2014, JP Morgan Chase & Co. overtime has become the leading enterprise within the industry

Concentration and Competition Intensity

• The financial industry has industries within itself

• Those industries are

• Banking

• Diversified Financials

• Insurance

• In comparison to Diversified Financials and Insurance, the Banking industry has higher competiton intensity within the industry as well as having more oppurtunity

   
  

Industry Trend Analysis I

What is the trend of the industry?

Industrial Trend (Industry Total Size)

• JP Morgan Chase and Co. is a company in the banking sector of the financials industry

• The banking industry outperforms the diversified financials and insurance industries in 

• Total Operating Income

• Total Net Income

• The banking industry also performs at the same rate as other firms for Percentage of Profitable Enterprises

• However banking is behind diversified financials in terms of Total Revenue
  

Industrial Trend (Profitability)

• The banking industry's typical performance is consistently increasing, and ahead of other industries, in terms of

• Median Gross Margin

• Median Operating Margin 

• Median Net Margin

Industrial Trend (Efficiency)

• The Banking industry needs to it's utilization of assets in terms of 

• Median Asset Turnover

• Median Return on Assets

• There is no clear indication of the firm's

• Median Inventory Days 

• Median Cash Conversion Cycle

Industry Trend (Financial Health)

• The banking industry is better than other firms for its Median Liability-Asset Ratio

• However, the industry is lagging in

• Median Current Ratio

• Median Total Cash Flow From Operating Activities

• Median Cash and Cash Equivalents 
  

Industry Analysis II

Where does my industry stand in the value chain?

Industrial Comparison (Profitability)

• The Banking industry is significantly ahead of other industries in

• Total Operating Income
  

• Median Operating Margin

• Median Net Margin

• However, the banking enterprises are behind in

• Total Revenue 

• Median Revenue

• Banking performs at the same level as Insurance and Diversified Financials for

• Break-Even Probability
  

Industry Comparison (Growth)

• The banking industry shows tremendous growth in

• Total Revenue Growth Rate

• Total Operating Income Rate

• Contrastingly, the banking industry is behind in growth in terms of

• Total Revenue Growth Rate

• Median Revenue Growth Rate
  

Industrial Comparison (Efficiency)

• Banking is ahead of other firms in 

• Median Sales General Admin Cost/Total Revenue

• Median Return On Invested Capital

• The Banking industry does face competition for 

• Median Return On Assets

• Median Labor Productivity

• There is also no data for the industry in 

• Median Inventory Turnover

• Median Days Payable/Receivable Days
  

Competition Positioning I

Where do I stand in the competition Landscape?

Revenue vs. Cost

• JP Morgan Chase and Co. obtained the most in terms of Total Revenue when compared to other banking enterprises 

• However, the diversified financial industry generates more revenue overall

Profit vs. Cost (Operating Income)

• Compared to the other banking enterprises, JP Morgan Chase and Co. is ahead in Operating Income, while also being a large firm and highly profitable

• The banking industry does face some competition because the diversified financial industry also yields a high amount of revenue
  

Operating Profit vs. Total Assets

• Not only does JP Morgan Chase and Co. utilize its assets better than the other baking enterprises, but the Banking industry also outperforms the Diversified Financials industry
  

Competition Positioning II

Rankings

Operating Margin vs. Revenue

• JP Morgan Chase and Co. is above the profit frontier and is also one of the better performers in its revenue class

Return on Asset vs. Liability Ratio

• In comparison to other enterprises in the banking industry, JP Morgan Chase and Co. can improve in terms of 

• Returns on Assets

• Liability Ratio/Financial Health
  

Enterprise Ranking (Total Revenue)

• The leading enterprises within the financial/banking industry are

• JP Morgan Chase & Co. 

• Wells Fargo

• US Bankcorp

•  JP Morgan Chase & Co. is ranked first, in terms of total revenue, compared to other enterprises

Enterprise Ranking (Operating Margin)

• In terms of operating margin, JP Morgan Chase & Co. is ranked 13th

• This means that the company is not making as much profit, in relation to total revenue, as other firms

• However, the difference in operating margins between firms is not significantly large

• Ex: SVB Financial Group has an Operating Margin of 55%, Comerica Inc has an Operating Margin of 49%, Huntington Group has an Operating Margin of 42%, whereas  JP Morgan Chase & Co. has an Operating Margin of 39%

Enterprise Ranking (Return On Assets)

• In terms of return on assets, JP Morgan Chase & Co. is ranked 13th but it has the same return on assets rate as the seven companies ranked above it, such as Regions Financial Corp and Key Corp

• It had a Return On Assets rate of 1%

• The top company also only had a Return On Assets rate of 2%

Profitability Distribution By Industry (Total Revenue)

• JP Morgan Chase and Co. is one of the firms that generates a high amount of revenue in the industry

• The significant amount of revenue the company is accumulating is an indication that the firm is stable and profitable
  

Stock Performance

• Compared to other firms in the financial/banking industry,  JP Morgan Chase & Co. has high performing stocks

• The company's stocks exhibit growth within the year

• After the significant drop in the stock market around March, the company's stock have steadily increased since then
  

Enterprise Comparison and Enterprise Trend

• After analyzing Enterprise Ranking, I did an additional analysis on Enterprise Comparison and Enterprise Trend
  

Enterprise Diagnosis I

What are my strengths and weaknesses?

Major Competitors to JP Morgan Chase and Co.

• Some of the main competitors for JP Morgan Chase and Co. within the banking industry are

• Bank of America Corp

• SVB Financial

• U.S Bancorp

• Wells Fargo
  

Enterprise Comparison (Size)

• In comparison to other firms, JP Morgan is the highest performing company in terms of 

• Total Revenue 

• Gross Profit

• Operating Income

• Profit Before Tax

• Net Income

Enterprise Comparison (Profitability)

• JP Morgan Chase and Co. is

• outperformed by SVB Financial in terms of Operating Margin and Net Margin

•  outperformed by the US Bancorp and SVB Financial in terms of Return on Assets

•  performs at the same rate as other firms in terms of Gross Margin 

Enterprise Comparison (Return on Investment)

• JP Morgan Chase and Co. is

• outperformed by SVB Financial in terms of Return on Equity and Investment Capital

• outperformed by the US Bancorp and SVB Financial in terms of Return on Assets

   

Enterprise Comparison (Key Indicators)

• JP Morgan Chase & Co. is performing relatively, compared to other companies, well in terms of 

• Gross Margin

• Net Margin

• 1/Liabilities Asset Ratio

• Returns on Equity
  

• However, the company is also being outperformed in terms of 

• Return on Assets

• Growth of Total Revenue

Enterprise Diagnosis II

Company Level trend

Enterprise Trend (Market Share)

• JP Morgan Chase & Co. generates the most, compared to other banking firms, in terms of 

• Total Revenue

• Operating Income

Enterprise Trend (Profitability)

• JP Morgan Chase and Co. is

• outperformed by other firms in terms of Operating Margin and Net Margin

•  outperformed by some firms and has the same rate as other firms in terms of Return On Assets

•  performs at the same rate as other firms in terms of Gross Margin 

Enterprise Trend (Financial Health)

• Within the financial/banking industry, JP Morgan Chase & Co.

• Has a greater Current Ratio compared to other companies

• Has relatively the same rate as other banking firms in terms of Return On Assets

• In recent years, its Long-Term Debt Ratio has decreased
  

    Enterprise Trend (Efficiency)

• When compared to other firms, JP Morgan Chase & Co. has a relatively consistent Total Revenue/Number of Employee Rate (employee productivity)

• However, it is outperformed by SVB Financial

Overall Analysis

• Compared to other firms in the financial industry, particularly the banking industry, JP Morgan Chase & Co. leads in terms of Total Revenue
  

• However, the company needs to grow in terms of profitability, specifically

• Return on Assets

• Operating Margin
  

Value Driver Analysis and Breakdown

Causes and Drivers

Value Driver Analysis

• Compared to other firms in the banking industry, JP Morgan Chase and Co. has a high Liability Asset Ratio and a Lower Operating Margin

Value Driver Analysis

• When compared to other banking firms, JP Morgan Chase and Co. has a somewhat low Return on Assets and a high Liability Ratio and  
  

Summary

• JP Morgan Chase on Co. is one of the top performers in the bank industry

• The company excels in terms of growth and revenue, however, the company needs to learn how to effectively utilize its assets