When the economy feels uncertain, investors return to the companies that keep money moving. That’s what makes banks relevant.
They may not always be flashy, but they are integrated into everyday financial life. Every day, people deposit paychecks, businesses seek capital, customers apply for loans, and investors still look for places to manage their wealth. That makes big banks worth keeping a close eye on, especially when investors are looking for a combination of stability, income and value.
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And that’s why today we put JPMorgan Chase and Bank of America side by side.
So which company is the best buy right now?
JPMorgan Chase & Co. (JPM)
On one side of the ring we have JPMorgan Chase, the largest bank in the country and one of the largest financial institutions in the world. The company serves consumers, businesses, corporations and wealthy clients through banking, credit cards, loans, investment banking and asset management.
JPM has a market capitalization of $843 billion and the stock has traded between $251 and $337 in the last 52 weeks. As of this writing, JPM stock is trading near the upper end of that range, although it is down 5% so far this year.
Bank of America Corp (BAC)
At the other extreme, we have Bank of America, another banking giant that competes in many of the same areas as JPMorgan, with a significant presence in loans, credit cards, wealth management and general banking services. Its business is closely tied to everyday financial needs, including investing through Merrill, making it a household name to millions of households.
Bank of America is the smaller company, with a market capitalization of $380 billion, and it also trades at a lower price. In fact, BAC stock has traded between $41 and $57 per share over the past 52 weeks, although its current price is much closer to its highs than its lows. Like JPM, BAC is also down 4% so far this year.
At this point, there is still no clear winner. Let’s get to know them both better.
Business Model Comparison: JPMorgan Chase & Co. vs Bank of America Corp
JPMorgan Chase and Bank of America are great banks, but they are not built the same.
JPMorgan has the broadest setup. It offers more ways to make money in different market conditions, rather than being limited to just one part of banking. It can benefit from daily customer activity through Chase, corporate lending through its commercial bank, and trading, trading and advisory work through its Wall Street operations.
Bank of America is also diversified, but its history leans more toward consumer relations and wealth management. Its large customer base provides consistent deposit activity, while Merrill adds another layer through its investment and advisory services.
Simply put, JPMorgan looks like the stronger all-around financial machine, with a greater reach on Wall Street and Main Street. Bank of America, meanwhile, is more closely tied to consumer banking, wealth management and broader financial services.
Financial health
To better compare JPMorgan Chase and Bank of America, let’s look at their latest quarterly numbers:
Metric
JPMorgan Chase
bank of america
Revenue
$49.8 billion
$30.3 billion
Net income
$16.49 billion
$8.58 billion
Operating cash flow
-$147.78 billion
$12.61 billion
Forward P/E
13.80x
11.92x
JPMorgan is the largest business by a wide margin, reporting $49.84 billion in total net income for the first quarter, compared to Bank of America’s $30.3 billion in income, net of interest expense.
JPMorgan is also the most profitable bank, with $16.49 billion in net income, compared to $8.6 billion for Bank of America. That gives JPMorgan a clear profit advantage.
Cash flow is where Bank of America looks best, at least for the quarter. It reported $12.61 billion in operating cash flow, while JPMorgan posted negative operating cash flow of $147.78 billion. That gives BAC the strongest cash flow result for the period, although operating cash flow at large banks can vary significantly from quarter to quarter due to changes in loans, deposits, business assets, securities and other balance sheet items.
The valuation also favors BAC. Its Forward P/E stands at 11.92x, below JPMorgan’s ~14x. Both are below the industry average of 16.79x, but the former looks cheaper by this metric.
Overall, JPMorgan looks stronger on size and profitability, while Bank of America looks better on valuation and recent operating cash flow.
Dividend history
Financial history is one thing, but how well a company pays its investors is another.
JPMorgan Chase has been raising its dividend for more than 10 years. It pays $6 per share per year, which translates to a yield of about 1.9%. It also has a dividend payout ratio of 26%, suggesting the company still retains most of its profits to reinvest.
Meanwhile, Bank of America has also increased its dividend for more than 10 years. It pays an annual forward dividend of $1.12, which translates to a yield of approximately 2%, slightly higher than its competitor. Like JPMorgan Chase, BAC is also keeping its payout ratio low at 25%, suggesting it still has room to reinvest in the business.
Analyst Ratings
While both stocks are down so far this year, their strong business models and strong financial positions have kept Wall Street analysts optimistic.
A consensus among 27 analysts rates JPM shares a “moderate buy,” with a score of 3.89 out of 5. Their mid-to-high price targets suggest upside potential of between 11% and 28%.
Likewise, BAC has a consensus rating of “Moderate Buy,” although it has a better average score of 4.37. Their mid-to-high price targets are also a bit higher, suggesting upside potential of between 16% and 34%.
Verdict
Both JPMorgan Chase and Bank of America are solid banking names, but they appeal to different types of investors.
JPMorgan looks like the stronger bank overall. It has greater scale, higher revenue, higher profitability and greater business reach, giving it the advantage for investors who want a more reliable banking franchise.
Bank of America, however, makes a stronger case for income-focused value investors. It trades at a lower Forward P/E, offers a slightly higher dividend yield, and has greater upside potential based on analyst targets.
In the end, JPMorgan looks like the better all-around deal, while Bank of America may be the more attractive option for investors looking for value, income, and growth potential.
As of the date of publication, Rick Orford had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
