JP Morgan (
JPM
) is one of the leading global financial services company. The firm
has an asset base of nearly $2 trillion and serves customers in
more than 60 countries. Its main competitors include Bank of
America (
BAC
),
Wells Fargo
(
WFC
), Goldman Sachs (
GS
), Deutsche Bank (
DB
) and Morgan Stanley (MS).
JP Morgan recently received approval from Chinese regulators for
a joint venture that will allow it to underwrite stocks and bonds
in mainland China. JP Morgan could previously underwrite deals in
Hong Kong, but the approval now allows access to mainland China
where some of its competitors like UBS (UBS) and Goldman Sachs
already offer clients the opportunity to raise capital. JP Morgan
will have a 33% stake in the joint venture with Shenzhen-based
First Capital Securities Co.
Investment banking accounts for almost 6% of the
$48 Trefis price estimate for JP Morgan's stock
. Our price estimate stands about 8% above the current market
price.
JP Morgan derives most of its revenues from its retail banking
operations in the U.S. - only 20% of its revenues come from outside
of the U.S., substantially lower than competitor Citigroup
(C) which generates more than 50% of its revenue abroad. The
recent joint venture approval will aid JP Morgan's initiative to
increase its foothold in Asia, where the firm already maintains
partnerships including its JV with China International Fund
Management Co. Asia-Pacific represents 14% of JP Morgan's global
institutional business, but the firm is reportedly targeting a
pickup towards 20%.
Strong Investment Banking Performance by JP Morgan in
2010
JP Morgan offers a full range of investment banking services to
its clients and emerged as the top investment bank in 2010, with
investment banking revenues of $5.2 billion and a market share of
nearly 8%. Roughly 52% of total investment banking industry
revenues came from the American region, where JP Morgan maintains a
strong presence. JP Morgan also ranked 2nd in the Asian-Pacific
region according to Dealogic (as quoted by The Wall Street
Journal).
With the growing presence in China, JP Morgan will look to
increase its share in the global equity underwriting market. We
currently estimate that JP Morgan's market share will remain stable
at 8% during our forecast period. However, given the company's
efforts to capture share of the growing Chinese market, there could
be upside to our forecasts and $48 price estimate for JP Morgan
stock. We note that our price estimate already implies a roughly 8%
premium to market price.
To see the impact of various trends in JP Morgan's equity
underwriting market share on its stock value, drag the trend line
in the modifiable chart above.
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You can see the complete $48 Trefis Price estimate
for JP Morgan's stock here
.