One of the best ways to measure the performance of the US economy is to examine the financials of America’s largest banks. Since JPMorgan Chase & Co (NYSE: JPM) is America’s largest bank, JPM could be a good barometer for the US economy.
JPMorgan Chase & Co (NYSE: JPM) was America’s largest bank with $3.744 trillion in total assets on 31 December 2021. Impressively, JP Morgan’s total assets grew from $3.385 trillion on 31 December 2020.
JPMorgan Chase (JPM) operated almost 5,000 branches and 16,000 automatic teller machines (ATMS) in October 2021, Bankrate estimates. In fact, Bankrate claims almost half of Americans bank at Chase.
Is JPMorgan Chase (JPM) a Value Investment?
Many investors will classify Chase (NYSE: JPM) a value investment because of a modest share price and a giant valuation.
For example, Mr. Market paid $146.61 for JPM on 28 January 2022. The share price rose slightly from $132.12 on 25 January 2021. Thus I consider JP Morgan is a stable stock with enormous value.
In particular, Morgan has enormous amounts of cash. For example, Chase had $1.436 trillion in cash and short-term investments on 31 December 2021. The cash and short-term investments grew from $1.327 trillion on 31 December 2020.
Hence, I consider Chase a value investment because it has a reasonable share price and an enormous pile of cash.
How Much Money is JPMorgan Chase making?
JP Morgan (JPM) is making enormous amounts of money. For example, Chase reported a quarterly gross profit of $29.257 billion on 31 December 2021. The quarterly gross profit grew from $28.927 billion on 31 December 2020.
Conversely, JP Morgan’s quarterly operating cash flow fell from $14.768 billion on 31 December 2020 to $12.657 billion on 31 December 2021. In comparison, JP Morgan reported $30.675 trillion in quarterly revenues on 31 December 2021. The quarterly revenues grew from $29.231 billion on 31 December 2020.
In comparison, JP Morgan reported $30.675 trillion in quarterly revenues on 31 December 2021. The quarterly revenues grew from $29.231 billion on 31 December 2020.
However, JPM’s growth rate is not making up for the losses during the COVID-19 pandemic. For example, Morgan’s revenues shrank by 14.02% in the quarter ending on 31 December 2020.
How Much Cash is JPMorgan Chase generating?
Unfortunately, JPMorgan Chase (JPM) did not report cash flows for the quarter ending on 31 December 2021.
However, JPMorgan Chase reported a quarterly operating cash flow of $25.617 billion on 30 September 2021. Impressively, Chase reported a quarterly ending cash flow of $54.448 billion on 30 September 2021. Moreover, JPM reported a quarterly ending cash flow of $97.047 billion on 30 September 2021.
Data shows Chase can generate even more cash. For example, it reported a quarterly ending cash flow of $711.072 billion and a quarterly financing cash flow of $218.911 billion on 30 September 2021. Therefore, Chase generates enormous amounts of cash.
Debt is Power
However, JPMorgan Chase (NYSE: JPM) also generates enormous amounts of debt. For example, JPM reported a total debt of $301.005 billion on 31 December 2021. Interestingly, the total debt fell from $625.297 billion on 30 September 2020.
I think that debt gives Chase enormous power because the debt gives JPM incredible amounts of leverage over creditors. To explain, the creditors have to keep JPM in business to ensure that debt is repaid.
More importantly, JPMorgan Chase has leverage over the ultimate creditor the Uncle Sam and the Federal Reserve. To explain, Chase is so huge the Federal Reserve and the federal government will have to bail it out whenever it gets in trouble. For example, the US Treasury Department bailed out JPMorgan Chase & Co with a $25 billion line of credit during the Great Meltdown of 2008.
Why Buffett owns Monster Banks
Consequently, Chase cannot go out of business, because your Uncle Sam must bail it out. That makes JPMorgan Chase and other monster banks tremendous value investments. Which is why Warren Buffett loves monster banks.
Notably, three of Berksihre Hathaway’s (BRK.B) third largest holding in the third quarter of 2021 was a monster bank. Whalewatch estimates that Berkshire Hathaway owned 1.01 billion shares of Bank of America (BAC) in the third quarter of 2021.
Buffett owns BAC because of the government guarantees. Uncle Warren understands that Bank of America is too big to fail. I think Chase (JPM) has similar characteristics.
Why You Need Monster Bank Stock
Thus, monster banks are a safe addition to your portfolio because of the government guarantees. Notably, the Federal Deposit Insurance Corporation (FDIC) insures many of their accounts.
In addition, the monster banks are reliable dividend payers. For example, JPMorgan Chase (JPM) will pay three $1 quarterly dividends in 2022. Moreover, Chase’s dividend grew during the pandemic. It rose from 90¢ on 2 January 2021.
Overall, each Chase share delivered a $4 annual dividend, and a 2.73% dividend yield on 28 January 2022. Hence, I consider Chase (JPM) an excellent dividend stock.
If you want a safe stock that pays a tremendous dividend you need to investigate JPM.