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5 Reasons to Pick JPMorgan (JPM) Over Bank of America (BAC)
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As we bid adieu to the tumultuous year 2020, let’s check out how two major global banks – JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) – have fared amid coronavirus outbreak and the resultant economic and health crisis. Both belong to the Zacks Major Regional Bank Industry, which currently carries a Zacks Industry Rank #73 (placing it at the top 29% of more than 250 Zacks industries).
Banking industry as a whole was among the hardest hit by the pandemic. The turmoil that started in March continued to wreak havoc and weighed on investors’ sentiments. Nonetheless, after encouraging COVID-19 vaccine related data started coming out since early November, performance of bank stocks has reversed to some extent.
So far this year, SPDR S&P Regional Banking ETF (KRE - Free Report) and SPDR S&P Bank ETF (KBE - Free Report) are down 11.4% and 12.1%, respectively, despite witnessing some bullish stance over the past two months. Likewise, both JPMorgan and Bank of America have lost 10.1% and 14.9%, respectively, year to date. At the same time, S&P 500 Index has gained 17.7%.
Year-to-Date Price Performance
JPMorgan and Bank of America have market capitalization of $381.1 billion and $259.6 billion, respectively. Further, JPMorgan sports a Zacks Rank #1 (Strong Buy), while BofA has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Here are some of the key factors that we have taken in to consideration while comparing both the banks:
Revenues: Both JPMorgan and Bank of America are substantially diversified, supported by solid revenue mix. Also, both are on track to expand in new areas by opening branches.
Further, despite a challenging operating environment, deposits and loan balances for both have remained strong over the past several years. Moreover, the banks are investing heavily in technology to better align with changing consumer needs.
If we take a look at this year’s revenue performance till September quarter-end, JPMorgan’s total net revenues grew 4% from the prior-year level, while that of Bank of America recorded a decline of 5%.
Also, JPMorgan’s Zacks Consensus Estimate for sales for 2020 indicates growth of 2.5% from the year-ago reported number, while the consensus estimate for BofA suggests decline of 6.1%. Compared to these, the industry is expected to witness revenue fall of 1.8% for 2020.
Diversification Plans: Amid the current economic slowdown and low interest rate environment, it’s important to have well diversified business operations. Since the 2008 financial crisis, both JPMorgan and Bank of America have come a long way. The banks moved away from several non-core and unprofitable business to focus more on core operations, with improving revenue mix.
While both the banks are considered too big to be allowed to acquire another bank, there are no such restrictions on expanding other businesses via acquisitions.
JPMorgan is taking measures to further diversify operations. The company is seeking to make some meaningful acquisitions in the near future. Recently, at an investors’ conference, the company CEO Jamie Dimon signaled that the bank is considering buying asset management businesses or financial technology companies to accelerate growth.
Additionally, the company is doing on-bolt acquisitions that are likely to support its efforts to digitize operations and improve market share in several lucrative businesses. In 2019, JPMorgan acquired InstaMed Holdings Inc.
On the other hand, Bank of America, apart from making organic growth efforts, isn’t doing much to further diversify its businesses through acquisitions. Also, there are no management comments related to the inorganic growth strategy.
Capital Deployments: In the past, JPMorgan and Bank of America meaningfully deployed capital in terms of dividend payments and share repurchases to enhance shareholder value. However, in March 2020, the banks paused buybacks to preserve liquidity amid the COVID-19 mayhem.
Further, following the announcement of 2020 stress test results in late June, the Federal Reserve restricted dividends and share repurchases by major banks. Thus, both the banks continued to pay dividend at the same rate as previously and didn’t repurchase any shares till the year-end.
Now, with the results of the Fed’s second round of stress test coming out earlier this month, major banks are permitted to resume buyback, albeit on certain conditions. Subsequently, JPMorgan has authorized to repurchase shares worth up to $30 billion for 2021, while Bank of America is yet to announce any buyback plan.
Nonetheless, based on yesterday’s closing prices, JPMorgan has dividend yield of 2.88% and Bank of America has 2.40%.
Return on Equity (ROE): ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12 months for JPMorgan and Bank of America is 10.85% and 8%, respectively. Further, both the companies outpace the industry’s average of 7.87%.
Earnings Growth Projections: Analysts seem to be bullish on both JPMorgan and Bank of America’s earnings growth for next year. JPMorgan’s Zacks Consensus Estimate for earnings is pegged at $9.24 for 2021, indicating growth of 22.1% from the year-ago reported figure. Bank of America’s consensus estimate for 2021 earnings of $2.12 suggests growth of 19.4%.
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5 Reasons to Pick JPMorgan (JPM) Over Bank of America (BAC)
As we bid adieu to the tumultuous year 2020, let’s check out how two major global banks – JPMorgan (JPM - Free Report) and Bank of America (BAC - Free Report) – have fared amid coronavirus outbreak and the resultant economic and health crisis. Both belong to the Zacks Major Regional Bank Industry, which currently carries a Zacks Industry Rank #73 (placing it at the top 29% of more than 250 Zacks industries).
Banking industry as a whole was among the hardest hit by the pandemic. The turmoil that started in March continued to wreak havoc and weighed on investors’ sentiments. Nonetheless, after encouraging COVID-19 vaccine related data started coming out since early November, performance of bank stocks has reversed to some extent.
So far this year, SPDR S&P Regional Banking ETF (KRE - Free Report) and SPDR S&P Bank ETF (KBE - Free Report) are down 11.4% and 12.1%, respectively, despite witnessing some bullish stance over the past two months. Likewise, both JPMorgan and Bank of America have lost 10.1% and 14.9%, respectively, year to date. At the same time, S&P 500 Index has gained 17.7%.
Year-to-Date Price Performance
JPMorgan and Bank of America have market capitalization of $381.1 billion and $259.6 billion, respectively. Further, JPMorgan sports a Zacks Rank #1 (Strong Buy), while BofA has a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Here are some of the key factors that we have taken in to consideration while comparing both the banks:
Revenues: Both JPMorgan and Bank of America are substantially diversified, supported by solid revenue mix. Also, both are on track to expand in new areas by opening branches.
Further, despite a challenging operating environment, deposits and loan balances for both have remained strong over the past several years. Moreover, the banks are investing heavily in technology to better align with changing consumer needs.
If we take a look at this year’s revenue performance till September quarter-end, JPMorgan’s total net revenues grew 4% from the prior-year level, while that of Bank of America recorded a decline of 5%.
Also, JPMorgan’s Zacks Consensus Estimate for sales for 2020 indicates growth of 2.5% from the year-ago reported number, while the consensus estimate for BofA suggests decline of 6.1%. Compared to these, the industry is expected to witness revenue fall of 1.8% for 2020.
Diversification Plans: Amid the current economic slowdown and low interest rate environment, it’s important to have well diversified business operations. Since the 2008 financial crisis, both JPMorgan and Bank of America have come a long way. The banks moved away from several non-core and unprofitable business to focus more on core operations, with improving revenue mix.
While both the banks are considered too big to be allowed to acquire another bank, there are no such restrictions on expanding other businesses via acquisitions.
JPMorgan is taking measures to further diversify operations. The company is seeking to make some meaningful acquisitions in the near future. Recently, at an investors’ conference, the company CEO Jamie Dimon signaled that the bank is considering buying asset management businesses or financial technology companies to accelerate growth.
Additionally, the company is doing on-bolt acquisitions that are likely to support its efforts to digitize operations and improve market share in several lucrative businesses. In 2019, JPMorgan acquired InstaMed Holdings Inc.
On the other hand, Bank of America, apart from making organic growth efforts, isn’t doing much to further diversify its businesses through acquisitions. Also, there are no management comments related to the inorganic growth strategy.
Capital Deployments: In the past, JPMorgan and Bank of America meaningfully deployed capital in terms of dividend payments and share repurchases to enhance shareholder value. However, in March 2020, the banks paused buybacks to preserve liquidity amid the COVID-19 mayhem.
Further, following the announcement of 2020 stress test results in late June, the Federal Reserve restricted dividends and share repurchases by major banks. Thus, both the banks continued to pay dividend at the same rate as previously and didn’t repurchase any shares till the year-end.
Now, with the results of the Fed’s second round of stress test coming out earlier this month, major banks are permitted to resume buyback, albeit on certain conditions. Subsequently, JPMorgan has authorized to repurchase shares worth up to $30 billion for 2021, while Bank of America is yet to announce any buyback plan.
Nonetheless, based on yesterday’s closing prices, JPMorgan has dividend yield of 2.88% and Bank of America has 2.40%.
Return on Equity (ROE): ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12 months for JPMorgan and Bank of America is 10.85% and 8%, respectively. Further, both the companies outpace the industry’s average of 7.87%.
Earnings Growth Projections: Analysts seem to be bullish on both JPMorgan and Bank of America’s earnings growth for next year. JPMorgan’s Zacks Consensus Estimate for earnings is pegged at $9.24 for 2021, indicating growth of 22.1% from the year-ago reported figure. Bank of America’s consensus estimate for 2021 earnings of $2.12 suggests growth of 19.4%.
Legal Marijuana: An Investor’s Dream
Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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