JPMorgan Chase Looks Poised To Become Largest U.S. Bank In Terms Of Total Loans By End Of 2018

by Trefis Team
JPMorgan Chase
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JPMorgan Chase could dethrone Wells Fargo to become the largest U.S. bank in terms of outstanding loans as early as this year, as the banking giant continues to make the most of upbeat economic conditions in the country to grow loans at a faster rate than most of its peers. JPMorgan is already the largest U.S. bank in terms of total assets, market capitalization as well as total deposits, and the addition of total loans to this list will make it the undisputed leader in the U.S. banking industry. It should be noted that JPMorgan’s strength in the banking industry is not merely restricted to retail and commercial banking services, as it is also the largest investment bank and the third-largest custody bank in the country.

We capture the trends in loans and deposits for each of the five largest commercial banks in the country – JPMorgan ChaseBank of AmericaWells FargoCitigroupU.S. Bancorp – through interactive dashboards, while also detailing the impact of changes in these key factors on their valuations.

The figures above represent average loans for each bank over the last five quarters as detailed in their latest SEC filings. The total loans for all U.S.-based commercial banks is derived from data compiled by using quarterly call reports filed by all U.S. banks.

As seen above, the 5 largest U.S. banks reported a combined loan portfolio of nearly $3.8 trillion worldwide in Q2 2018 – representing over 38% of total loans handed out by all U.S. commercial banks. Citigroup stands out among these banks, with growth in its loan portfolio (5.6%) comfortably exceeding the rate of growth of loans across the industry (4.6%). This can be attributed primarily to Citigroup’s geographically diversified business model, which helped it overcome headwinds in the U.S. from the Fed’s ongoing rate hike process by reporting strong growth in key developing nations. JPMorgan has also done exceptionally well over recent quarters from its strong push in Asset and Wealth Management operations.

JPMorgan’s path to the top of the list has also been aided by Wells Fargo’s misfortune over recent years. While Wells Fargo faced significant growth headwinds over 2017 after a series of scandals came to light, the bank has been forced to slash its loan portfolio over recent months to comply with the growth restriction imposed on it by the Fed earlier this year. This would explain why Wells Fargo’s total loan portfolio has shrunk steadily over the last five quarters even though total loans across the U.S. banking industry grew steadily. This, coupled with the fact that loans for smaller banks have grown at a faster rate than that for the largest U.S. banks, explains the reduction in their combined market share to 38.4% in Q2 2018 from over 40% in late 2016.

With the Fed remaining hawkish about its interest rate forecast over 2018-19, loan growth is likely to remain depressed over the next few quarters. However, the growth rate should normalize once the Fed is done with the rate hikes and the interest rate environment stabilizes – something we believe will happen around mid-2020.

Details about how changes to key Loan and Deposit parameters affect the share price of the five largest U.S. commercial banks can be found in our interactive model for JPMorgan Chase | Bank of America | Wells Fargo | Citigroup | U.S. Bancorp

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