Breakout

Is There More Money in Banking Than Oil?

Breakout

It's a good time to be in the money business, says bank analyst Richard Bove of Rafferty Capital Markets. And that means it's a really good time to
be JP Morgan (JPM). Sure the company's stock is already at an all-time high, and despite a rocky year, its profits will be too.

"If you make the assumption that oil prices come down a little bit and interest rates go up a little bit, I don't think there's any question about the fact
that JP Morgan will surpass Chevron (CVX) and become the company in the U.S. that creates the third largest amount of profits," Bove predicts in the attached video clip.

It's worth noting that they're pretty close already, he says, with JP Morgan delivering the 4th highest profits in 2012. In fact, if you back out the London Whale event, he says the gap between 3rd and 4th all but disappears.

"It's quite possible that JP Morgan is already ahead" he says.

For the record, JP Morgan is currently 13th by market value in the S&P 500, while Chevron is 8th. No matter who ends up in the third or fourth spot, that's where the jockeying is apt to end for the foreseeable future.
"There's a huge gap to get into that league" Bove says. "Exxon (XOM) and Apple (AAPL) are in that $40 billion level, whereas JP Morgan and Chevron are in the $22 to $24 billion level."

So what's the point of this whole profit derby?

As Bove say it's all an exercise in perception and designed to challenge the notion that JP Morgan (or any of its mega cap financial peers) have gotten too big to manage and need to be broken up.

"If you start mentioning them in the same vein as those other (non-financial mega cap) companies, it shocks people into saying, 'how can this company be up there if it's doing so horribly?'" he says. "And the answer is, it isn't. "

View Comments (80)