JPMorgan Chase & Co.
Table of Contents
Business line risks
Enterprise wide risks
Prioritizing JPMorgan’s risks
A Holistic approach
JPMorgan Chase & Co. (NYSE: JPM) is one of the world’s largest financial institutions with over $2 trillion in assets. JPM is headquartered in New York and has grown substantially in the past ten years as a result of multiple significant acquisitions and mergers. Most recently, JPM purchased the assets of troubled investment broker Bear Stearns and retail banking institution Washington Mutual, both in 2008. Most financial institutions lost substantial share value throughout 2007 and 2008 due to the struggling residential housing market and overall economic conditions. JPMorgan Chase preserved through the worst of the financial crisis in remarkably good shape. Much of JPMorgan Chase's outperformance was due to common sense risk management. For example, the bank carried far more tangible capital than Citigroup in early 2008, providing a much larger buffer against subsequent losses. Such conservatism is still paying off, as JPMorgan Chase's capital base and earnings power ensure that the firm's recent surprise trading loss will not permanently damage the firm. That being said, the recent missteps is a reminder that even the best managers can mitigate, but not eliminate, risk at financial firms. Recommendation: Strengthen Risk Management Measures
The main concern stems from JPMorgan’s recent losses ($4.4 billion) due to synthetic credit trades made by the firm's CIO. The firm should continue to reduce its synthetic credit positions and strengthen its risk management measures especially in the areas of culture, governance and operations.
JPMorgan Chase & Co. (NYSE: JPM) is one of the prime banks in the United States offering solutions in the areas of investment banking, commercial banking, financial services for consumers and small businesses, financial transaction processing, private equity and asset management. Its clients include prominent corporations, hedge funds, institutional investors, educational institutions, healthcare organizations, governments and high-net-worth individuals in more than 100 countries. Post-Crisis, JPM’s operations have seen substantial growth due primarily to the acquisition of struggling firms Bear Stearns and Washington Mutual in 2008. These mergers have realized growth of 50% and 25% in revenues and assets respectively for the firm (JPMorgan Chase & Co.). Having purchased the operations of both firms at a significant discount, JPM is well-positioned to grow its market share by utilizing these new client portfolios and network of branches. The firm is also diversifying its portfolio, focusing substantial resources on expansion of its international operations, particularly in emerging markets including Brazil, India, and China.
Political: * Dodd Frank- Act will drive card issuers to find other ways to replace lost fee and interest income. * Federal Reserve likely to increase interest rates in 2014 * G20 endorsed the new ‘Basel 3’ capital and liquidity requirements at their Summit in Seoul, many details are not yet finalized
| Economical * Sluggish recovery in the US * US unemployment rate remains high at 9% * Consumer confidence remains low, particularly in regards to large financial institutions. The...
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