JPMorgan now valued more than BofA, Citi combined: BBG

JPMorgan Chase & Co. (JPM) is now worth more than competitors Bank of America (BAC) and Citibank (C) combined after 2023 consolidations and shakeups in the regional banking sector, according to a Bloomberg report.

Yahoo Finance Senior Reporter David Hollerith joins the Live show to summarize the state of the financial sector (XLF) and the outlook and challenges for these major banks.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

- But to explain more about how JPMorgan Chase is set to continue to be America's biggest bank and what's to expect in 2024, we want to bring in Yahoo Finance's David Hollerith. So David, thanks so much for coming on today and kind of breaking down where JPMorgan Chase stands and how it's set up for the year.

I mean, we've had-- we had Jamie Dimon on earlier this year, and we've had people come on our program and talk about how much he's done for the bank. So David where does JPMorgan Chase stand when it comes to 2024?

DAVID HOLLERITH: Yeah, I mean, I think if we just look at the last quarter, which is still has not quite ended. JP Morgan is a really big bank and it's expected to show full year 2023 profits on par with the GDP of the country Jordan, which is just gives you an idea of how large they are.

Now, one of the main reasons why JP Morgan has outperformed other big bank peers has been that it's largely navigated around some of the pitfalls that those peers are dealing with, and that's due to it playing more conservatively, and this is not so much of something that's happened this year as something that JPMorgan has been doing for years.

Now, of course, the bread and butter of banking is taking in deposits to make loans, and big banks have an advantage there. That's largely a story of scale. Smaller banks have been having to pay higher costs during higher interest rate increases that we've seen over the past year and a half. And so that's obviously been a benefit to the largest banks.

Crucially, though, JP Morgan this year has stood out by being able to purchase first Republic Bank from the FDIC, and that also proved to be sort of a game of scale. JPMorgan was competing against smaller banks, and ultimately, it offered the best deal to the FDIC.

Now, we can also take this and flip it on its head, and just look at some of JP Morgan's peers just to evaluate what it's dealing with versus the peers. Now, Citigroup and Wells Fargo are both dealing with profitability problems that have been years in the making.

Citigroup is trying to pull off an aggressive reorganization after decades of showing how being too big also can have its issues. Regulators have also capped Wells Fargo. They've capped its ability to grow its assets, and this has been due to the fake account scandals it had during the 2010s.

Also Bank of America, which has still been fairly profitable this year is still dealing with high unrealized bond losses, and that's been perceived as an earnings issue going forward, and that's largely why its stock has sort of lagged the other peer big banks. Now going back to all this, JP Morgan hasn't been facing any of those problems as far as management has said publicly the biggest issue for JP Morgan next year will be trying to compete with the record profits it's had this year.

I'd also point out too that if next year proves to be a year where banking generally does well, we could see investors seeking out more risk within the banking sector. And if that's the case, JP Morgan could be perceived as potentially too safe. This has been something that portfolio managers have sort of brought up to me, but, you know, obviously, this year has been incredible for the bank, and they have had a very good track record recently of outdoing expectations and earnings. So we'll be looking for that in early January when they report full year earnings.

- Fascinating stuff, especially for people looking for some of that potential upside in the banking sector next year. Appreciate you as always, our very own David Hollerith, Thanks so much.