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Financial Analysis Report for Jp Morgan Chase and Co

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FINANCIAL ANALYSIS REPORT FOR JP Morgan Chase and Co

                                                            Name: Sidhant Singhi

                                                            Roll no: GMAY17GF10

                                                            Course: FADM2

                                                            Instructor: Professor S.Vittal

                                                            Date : 28-07-2017

Studied the following aspects of JP Morgan with the help of secondary data available in the public domain. The descriptive findings and interpretations are based on the financial analysis done in the Excel sheet.

  1. Company Profile
  2. Shareholder’s Equity holding
  3. Income Statement
  4. Balance Sheet
  5. Cash Flow Statement
  6. Ratio Analysis
  7. Long Term Debt Structure
  8. Management Discussion Analysis

Company Profile

JPMorgan Chase & Company is a key player in the financial services sector of the United States of America with its operations ranging from commercial banking, asset management, investment banking, private equity, financial services for consumers and small businesses and financial transaction processing. Its operations are not limited to the US only as it has worldwide presence but its biggest market operations are in the US. Its history dates back to 1799 when it first begun its operations in New York City. Over the years the company has grown in reaps and bounds through mergers and acquisitions that have made it the biggest bank in Unites States of America, with an asset base of roughly $ 2.5 trillion at the end of 2016. JP Morgan Chase has always keep abreast with competition more so the innovations in the financial services sector, and it is for this reason that it has targeted some of the best competitors with significant potential for growth for mergers.

JPMorgan Chase & Co. owns five bank subsidiaries in the United States:

JPMorgan Chase Bank, National Association; Chase Bank USA, National Association; Custodial Trust Company; JPMorgan Chase Bank, Dearborn; and J.P. Morgan Bank and Trust Company, National Association.

For management reporting purposes, JPMorgan Chase's activities are organized into a corporate/private equity segment and four business segments; consumer and community banking, corporate and investment bank, commercial banking, and asset management. The investment banking division at J.P. Morgan is divided by teams: industry, M&A and capital markets. Industry teams include consumer and retail, healthcare, diversified industries and transportation, natural resources, financial institutions, metals and mining, real estate and technology, media and telecommunications.

[pic 1]

JP Morgan earns a major chunk of revenue from asset management and commissions. Revenue from asset management and card income has consistently grown from 2014 to 2016. Security gains has not contributed much to JP Morgan’s revenue.

Shareholder’s Equity Holding

JP Morgan  has an Authorised Share capital of 9 billion. As per Dec-2016, approximately 3520 million shares are outstanding. There has been a decreasing trend in the Shares outstanding due to share repurchase by company resulting in the increasing trend of Treasury stock. This trend has been showcased in the presentation.

There is a considerable decrease in the amount of “Accumulated other comprehensive gain” from 2189 million in 2014 to 192 million in 2015.  This was a reduction of 1997 million in income. This is shown in figure below.

[pic 2]

These are unrealised losses arising majorly due to losses in investment securities. There are some unrealized losses in translational adjustments.

There is a considerable loss in the amount of “Accumulated other comprehensive income/loss ” from 192 million in 2015 to -1175 million in 2016( a loss).

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This loss was again mainly due to losses in investment securities. These accumulated comprehensive losses have been on the increase.

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Retained earnings are growing at the rate of 12 % every year. This is good for the business.

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The total shareholders equity has been increasing from 2014 to 2016 in spite of stock repurchase (increase in treasury stock) and a increase in the accumulated other comprehensive loss. This is an indicator of growth.

Income Statement

The time scope for the Income Statement analysis was year ending Dec-2014,2015 and 2016.

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I have done the vertical and horizontal analysis of the Income Statement and come up with a few observations which are highlighted below: -

  1. JP Morgan's revenue declined by 2% from 2014 to 2015 and remained almost same from 2015 to 2016.
  2. JP Morgan’s operating expenses have consistently fallen from 2014 to 2016(2% every year). The company has managed to control its operating costs.
  3. JP Morgan's operating income declined by 2% from 2014 to 2015 but then increased by 8 % from 2015 to 2016 exceeding 2014 level.
  4. JP Morgan's income before interest and income taxes declined slightly(1%) from 2014 to 2015 but then increased drastically by 8% from 2015 to 2016 far exceeding 2014 level.
  5. JP Morgan's net income increased by 12 % from 2014 to 2015 but then increased by only 1%  from 2015 to 2016. This was due to interest payment in 2016.
  6. Interest Expense decreased by 5% from 2014 to 2015 but increased by almost 32% from 2015 to 2016. There is a corresponding increase in debts in balance sheet.  

  1. Cash dividends paid out to common stockholders has been on an increasing trend. $1.58/share was paid out in 2014 which increased to $1.88/share in 2016. This is also an outcome of the decreasing trend in the outstanding shares.

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The net income margin rose from 22% of revenue in 2014 to 25% of revenue in 2015 and 2016. This is a good indicator of growth. Operating expenses fell considerably in 2016 to 55% of revenue as opposed to 61% of revenue in 2014 and 2015. The company is able to control expenses effectively.

[pic 12]

JP Morgan earns a major chunk of revenue from asset management and commissions. Revenue from asset management and card income has consistently grown from 2014 to 2016. Security gains has not contributed much to JP Morgan’s revenue. However, revenues from principal transactions declined from 2014 to 2015 and remained flat thereafter. Even revenues from Investment banking fees have remained flat from 2014 to 2016.

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