Porter’s Five Forces Analysis of JPMorgan Chase
Key Facts
| Name | JPMorgan Chase & Co. |
| Industry | Banking and Financial Services |
| Founded | 2000 |
| Headquarters | New York, United States |
| CEOs | James Dimon |
| Revenues | US$121.64 billion,2021 |
| Profit | US$48.33 billion, 2021 |
| Competitors | Bank of America, Citigroup, Wells Fargo, |
Company Overview
Financial and investment banking services are offered by jpmorgan chase & co. commercial banking, asset and wealth management, corporate and investment banking, and consumer and community banking are its operating segments. Customers and businesses are served by the consumer and community banking segment through personal service in bank branches, online, mobile, and telephone banking. A variety of investment banking services is offered by corporate and investment bank division. Financing for real estate owners and investors is offered through the commercial banking market. Services for managing assets and wealth are offered by the asset and wealth management segment. The company was established in 2000, and its us headquarters are in new york. it comes in at 2nd on forbes global 2000 companies and number 24 on the fortune 500 companies.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Micheal E. Porter in 1979,at Harvard Business School.
JPMorgan Chase Rivalry among Existing Competitor
- JPMorgan Chase :It is privately owned world top financial institution and has maintained its top position since decades, Its net income has continuously growing from US$8.48 billion in 2005 to US$48.33 billion in 2021 even 2008 financial crisis, and in last 17 years loss was never reported. Its net revenue has continuously growing from US$62 billion in 2006 to US$121.65 in 2021. Its total assets have grown from US$2,031.99 billion in 2009 to US$3,743.57 in 2021. JPMorgan Chase was the largest bank in the United States as of December 31, 2022, when its market capitalization was US$393.34 billion. By this metric, Bank of America was the second-largest bank, followed by Wells Fargo.
- Bank of America: Both banking and nonbank financial services are provided by it. Consumer Banking, Global Wealth and Investment Management, Global Banking, Global Markets, and All Other comprise its operating segments. The consumer banking segment provides banking and investing services. Investment management, brokerage and retirement products are offered by Global Wealth and Investment Management. Lending-related items are the focus of the global banking segment. Sales and trading services are included in the section for global markets. Activities related to asset and liability management make up the All Other sector. The company’s headquarters are in Charlotte, USA, and it was established in 1904.
Its total assets have grown from US$2,230.23 billion in 2009 to US$3,169.49 in 2021.
Its revenue grows from US$31.56 billion in 2003 to US$111.39 billion in 2011 and then remains between US$83 billion to US$94 billion between 2012 and 2021, Its last three year revenue is as follows US$89.11 billion ,US$85.53 billion and US$91.24 billion for 2021, 2020 and 2019 respectively. Its net income remains fluctuated as follows, profit of US$6.3 billion in 2009 and loss of US$(2.2) billion in 2010 and then makes profits till 2021, its 2021 profit is US$31.98 billion.
- Citigroup: It deals in the supply of financial services and products. Its revenue remains between US$77.64 billion to US$69.53 billion between 2011 and 2021, Last three year revenue is as follows US$71.90 billion, US$74.30 billion and US$74.29 billion for 2021, 2020 and 2019 respectively. Its net income remains fluctuated as follows, it makes huge loss in 2008 amounting to US$(27.70) billion and then again US$(1.60) billion loss in 2009 during global financial crisis, afterward it continue to make profit except 2017 loss of US$(6.80) billion, In 2021 it makes profit of US$21.95 billion.
- Wells Fargo: It is a financially diversified, locally based firm. It offers banking, insurance, investments, mortgages, consumer and commercial financing, among other financial services. Its revenue remains between US$74.26 billion to US$88.9 billion between 2009 and 2021, Last three year revenue is as follows US$78.49 billion, US$74.26 billion and US$86.83 billion for 2021, 2020 and 2019 respectively. It never reported loss since 2009, its profit for 2021 is US$21.55 billion.
JPMorgan Chase Threat of New Entrants
- Market Share: JPMorgan Chase, Bank of America, Wells Fargo, and Citibank are the “Big four banks” in the United States. In terms of revenue in FY-2021 JP Morgan Chase makes US$121.65 billion, Bank of America makes US$89.11 billion, CitiGroup makes US$71.90 billion and Wells Fargo US$78.49 billion and they are so big that one of the top commercial non four big bank Goldman Sachs on average accumulates revenue equal to 1 year of JP Morgan chase in almost 4 years if we analyze revenue of banks from 2009 to 2021.
- Stability in the American financial industry: During the second quarter of 2022, the common equity tier 1 (CET1) capital ratio for each of the big four American banks was significantly higher than the necessary 4.5%. The CET1 ratio for JPMorgan Chase was 12.17 %.
- High Capital Investment: The Industrial and Commercial Bank of China (ICBC), which is majority owned by the Chinese government, had US$5,540 billion in total assets in 2021, while JP Morgan Chase, a private bank, had US$3,740 billion. New financial institutions can enter the market, but it is very difficult to compete with the top players without significant government support, even it took years for ICBC to do.
JPMorgan Chase Bargaining Power of Suppliers
- Suppliers Certification: For certification as a diverse supplier, a requirement for becoming a supplier, JPMorgan Chase collaborates with agencies that offer third-party certifications. This lessens the supplier’s ability to negotiate.
- Supplier Diversity: Since 2015, JPMorgan Chase has spent US$11 billion with a variety of vendors, which significantly lessens their ability to negotiate. Its diversified supplier spending totaled more than US$2 billion in just 2020.
JPMorgan Chase Bargaining Power of Buyers
- Customer base: JP Morgan customers base is growing continuously due to its customers confidence, Its households customer grows from 45 million in 2006 to 66 million in 2021and average deposit increase from US$ 204 billion in 2006 to US$1,055 billion in 2021.
- Large Branches Network: By number of branches, JP Morgan Chase Bank was the largest bank in the US as of September 2022. The bank had 5,023 locations; Wells Fargo Bank came in second with 4,765 locations, while Bank of America came in third with 4,088 locations. In compared to Lloyds Bank, the largest British bank in terms of branches, Wells Fargo has almost three times as many locations.
JPMorgan Chase Threat of Substitute Products or Services
- Market Share. JP Morgan chase market capitalization has grown from US$165.88 billion in 2010 to US$466.21 billion in 2021. Likewise Top largest revenue producing commercial bank in USA is JP Morgan US$121.65 billion, Bank of America US$89.11 billion, Wells Fargo US$78.49 billion and ContiGroup US$43.89 billion. There diversified product range and quality of service makes difficult for other competitors to compete with them.
- Competitive Advantage in more than one Critical assets or KPIs: JP Morgan chase have competitive advantage in more than one critical assets or KPIs. For example, Its number of branches has grown as follows, 3,079’ 5,508’ 4,908’ 4,790’ in 2006, 2011,2020 and 2021 respectively, considering world digital trend. JP Morgan chase is the first bank to have branch presence in all contiguous 48 U.S. states.
- Growth of top banks: Quickest growth of top banks as compared to small players keeps top banks and their product market leader. JPMorgan Chase total assets grown from US$1,351.52 billion in 2006 to US$3,743.57 in 2021. Further revenue that goldman sachs (one of top non Big four bank) generated in last 10 years amounting to US$377.14 billion and it only took 4 years for JP Morgan chase to exceed it and it generated US$465.37 billion in 4 years.
- Digital banking in the U.S. Modern technology allows for the digital delivery of traditional banking services, replacing physical bank locations with less expensive online support. As a result, since 2009, fewer bank branches have existed in the United States. 59 million active digital consumers use JP Morgan Chase presently, including 45 million active mobile users. The number of active mobile users of JP Morgan has grown from 8.20 million, 40.90 million, and 45.50 million users in 2011, 2020, and 2021, respectively.
References
- JPMorgan Chase, profile on Forbes
- Bank of America, Profile available at Forbes
- CitiGroup, profile on Forbes
- Well Fargo, profile on Forbes
- JPMorgan Chase, profile on Fortune500
- Global 2000: Berkshire Hathaway Takes Down JPMorgan As America’s Largest Company at ForbesGlobal2022ranking
- Net revenue of JPMorgan Chase from 2006 to 2021(in billion U.S. dollars) at Statista
- Net income of JPMorgan Chase from 2005 to 2021(in billion U.S. dollars) at Statista
- Bank of America Annual reports,1998 to 2021 Annualreports.com
- Total assets of Bank of America from 2009 to 2021(in billion U.S. dollars) at Statista
- Revenue of Citigroup from 2011 to 2021(in billion U.S. dollars) at Statista
- Total revenue of Wells Fargo from 2009 to 2021(in billion U.S. dollars) at Statista
- Largest commercial banks in the United States in 2021, by revenue(in billion U.S. dollars) at Statista
- Net revenue of Goldman Sachs from 2009 to 2021(in billion U.S. dollars) at Statista
- Largest banks in the United States in 2022, by total assets(in billion U.S. dollars) at Statista
- Largest banks worldwide as of December 2021, by assets(in trillion U.S. dollars) at Statista\
- JPMorgan Chase & Co logo, Suppliers at officalWeb
- Annual report 2021, JP Morgan
- Leading banks in the United States in 2022, by number of branches at Statista
- Largest commercial banks in the United States in 2021, by revenue(in billion U.S. dollars) at Statista
- Market capitalization of JPMorgan Chase from 2010 to 2021(in billion U.S. dollars) at Statista
- Total assets of JPMorgan Chase from 2006 to 2021(in billion U.S. dollars) at Statista
- Largest banks in the United States as of December 2022, by market capitalization(in billion U.S. dollars) at Statista
- Net income of Bank of America from 2009 to 2021(in billion U.S. dollars) at Statista
- Net income of Citigroup from 2005 to 2021(in billion U.S. dollars) At Statista
- Net income of Wells Fargo 2009 to 2021(in billion U.S. dollars) at Statista