JP Morgan's Retail Deposits Expected to Climb

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The total average value of checking, savings, time and other deposits held by JP Morgan ( JPM ) in its retail financial services group has been steadily rising over the years, from $207 billion in 2007 to $341 billion in 2009 mainly due to the acquisition of Washington Mutual (WaMu) in September of 2008. JP Morgan competes with Bank of America ( BAC ), Citigroup ( C ), Wells Fargo ( WFC ) and others in the retail banking sector.

We expect this positive trend to continue as higher savings rate and uncertainty about economy lead to growth in deposits, as well as improvements in the company's bank services. Compared to our estimate of $540 billion in average deposits by the end of Trefis forecast period, Trefis members expect a steep increase to $671 billion in 2013, followed by a gradual decline thereafter..

We currently have a Trefis price estimate of $48.00 for JP Morgan's stock , about 10% above the current market price of $43.64.

Rising Savings Rate, Economic Uncertainty Will Result in Growth in Deposits

JP Morgan's asset base grew as more customers chose to safeguard their assets in checking/savings accounts. Growth in personal savings rate which is expected to remain as consumers change their consumption patterns will also help increase deposits. The personal savings rate grew from an average of 1.25% in 2005 to 5 % in 2009. JP Morgan currently has an estimated 9% share of the US deposit market.

Improving Retail Banking Services

JP Morgan has been continuously trying to improve its position in the retail banking space. In 2009 , the company added 2,400 branch sales staff such as personal and business bankers to meet the needs of customers. The company revamped its overdraft policies to meet regulatory requirements and providing services that will make it easier for consumers. Customers now have the ability to monitor on a real time basis their balances over the course of the day.

Trefis Community Forecast

The Trefis community forecasts that JP Morgan's average deposits will increase from near $414 billion in 2011 to $591 billion by the end of the Trefis forecast period, compared to the baseline Trefis estimate of an increase from $359 billion to $539 billion during the same period. The member estimates imply a slight upside to the Trefis price estimate for JP Morgan's stock.

Our complete analysis for JP Morgan's stock is here .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks , US Markets

Referenced Stocks: BAC , C , JPM , WFC

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