JPMorgan Chase (
) is buying the online coupon firm Bloomspot in what is the latest
move by one of the country's largest card issuers to build its
customer base by providing additional benefits and value added
services. JPMorgan is reportedly paying $35 million for the daily
deals website, and will use the newly acquired assets along with
the customer usage data it has accumulated over years to come up
with various loyalty programs to target potential customers.
Increased competition and a significant reduction in fee
revenues from recent regulatory measures in the card industry have
forced the big banks to look for ways to coax customers to use
their cards - ranging from improved technology offerings to better
reward programs. Over the last two months, competitors Capital One
) and U.S. Bancorp (
) announced the acquisition of
data aggregator firm Bundle Corp.
prepaid card processing company FSV Payment Systems
respectively - both deals clearly aimed at drawing more customers
in the future.
We maintain a
$46 price estimate for JPMorgan's shares
, which is at a premium of about 5% to current market
See our full analysis of JPMorgan
JPMorgan Chase Is The Leader Of The Pack…
A glance at the chart above shows how important JPMorgan's cards
division is to its business model - with the division
contributing to a fifth of its total estimated value. The global
banking group is the second largest card lender in the world, after
Bank of America (
), with a globally diversified card business spread over 30
countries. In the U.S., JPMorgan Chase is bigger than Bank of
America - a position it achieved by a series of mergers involving
J.P.Morgan Bank, Chase Manhattan Bank, Bank One and Washington
Mutual over the last decade.
… And Clearly Wants To Stay That Way
As is evident from the chart above, JPMorgan Chase witnessed a
substantial decline in the size of its outstanding card loan
portfolio since 2008 - an obvious result of the recession and the
continuing sluggishness in the economy. Tougher card legislation
also made things worse, as did the bank's prudent move towards
tightening its lending practices.
Consequently, JPMorgan has had to seek out options to make its
card offerings stand out as the big banks compete for customers'
attention. The recent acquisition of Bloomspot is an attempt by the
card issuer to provide better and more relevant offers to existing
and prospective customers by taking a more focused approach towards
their buying habits. The bank will also capitalize on its extensive
merchant relationships and promote them to customers through
partnerships - a win-win situation for everyone involved.
The impact of this acquisition should be seen in the rate of
growth of JPMorgan's card loan balances over coming years. If the
bank is able to successfully leverage Bloomspot's services, then we
can expect a better loan growth in the future than the 4% annual
growth we currently forecast. You can see how an increase in this
figure can help JPMorgan's share price by making changes to the
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