Milestone 1 (JP Morgan Chase)
Gregory Churchill
ECON 230 Macroeconomics
Professor Bajah
March 27, 2022
Company Overview
J.P. Morgan Chase (JPM) is one of the four largest banks in America and a global leader in financial services. Operating in more than 100 countries, they offer services to corporations, governments, and institutions worldwide. (J.P. Morgan | Official Website, n.d.). JPM offers private and corporate banking services, investment solutions, wealth planning, and lending services. The company employed approximately 255,351 people worldwide in 2020 (Norrestad, 2021).
Does the company have a comparative advantage over its rivals?
JPM is the largest bank in the US by market cap and offers a dividend yield of 2.84%. Although Citigroup has a dividend yield of 3.60%, JPM’s annual dividend is the largest of the top four banks at $4.00 (JPM Dividend Yield, History & Payout Ratio (JPMorgan Chase & Co.), 2022). The largest market cap and highest annual dividend suggest that JPM has a comparative advantage over its rivals.
Explain the supply and demand for its key product or service.
JPM supplies various services, “Investment banking, treasury and securities services, asset management, private banking, card member services, commercial banking, and home finance. JP Morgan Chase serves business enterprises, institutions, and individuals.” (Bloomberg - Company Profile: JPMorgan Chase & Co, n.d.). Demand for banking services is driven by the economic performance of a country or region. The more productive the economy is, the more workers earn and need to utilize banking services to manage their earnings. High economic performance also encourages consumers to apply for lending services from financial institutions to purchase homes, cars, and other large purchases.
Provide the GDP of its home country and a key market (country).
The U.S. real current-dollar GDP for 2018 is estimated to be $20.49 trillion (Gross Domestic Product, 4th quarter and annual 2018 (third estimate); Corporate Profits, 4th quarter and annual 2018 | U.S. Bureau of Economic Analysis (BEA), 2018). “Financial markets in the United States are the largest and most liquid in the world. In 2018, finance and insurance represented 7.4 percent (or $1.5 trillion) of U.S. gross domestic product.” (Financial Services Industry Spotlight | SelectUSA.gov, n.d.).
How does fluctuations in GDP, economic growth, investments, and patents affect the company’s profitability?
The banking sector’s profitability is directly proportional to GDP due to earnings consumers and corporate entities, banks primary customers, supporting the transactions performed by companies like JP Morgan Chase. Banks have been seeking an increased number of patents over the last few years. “The patent boom has two likely causes, experts say. A tech patent with broad applicability outside of the banking sector could be hugely profitable if your patent rights are broad enough. The other main cause is that patents offer long-term protection against lawsuits. Banks have spent huge sums over the last decade fighting patent trolls.” (Cumming, 2015).
References
Bloomberg - Company Profile: JPMorgan Chase & Co. (n.d.). Www.bloomberg.com. Retrieved March 23, 2022, from https://www.bloomberg.com/profile/company/JPM:US#:~:text=JPMorgan%20Chase%20%26%20Co.%20provides%20global%20financial%20services
Cumming, C. (2015, July 2). What’s Behind the Huge Increase in Bank Patent Filings? American Banker. https://www.americanbanker.com/news/whats-behind-the-huge-increase-in-bank-patent-filings
Financial Services Industry Spotlight | SelectUSA.gov. (n.d.). Www.selectusa.gov. Retrieved March 28, 2022, from https://www.selectusa.gov/financial-services-industry-united-states#:~:text=Financial%20markets%20in%20the%20United%20States%20are%20the
Gross Domestic Product, 4th quarter and annual 2018 (third estimate); Corporate Profits, 4th quarter and annual 2018 | U.S. Bureau of Economic Analysis (BEA). (2018). Bea.gov. https://www.bea.gov/news/2019/gross-domestic-product-4th-quarter-and-annual-2018-third-estimate-corporate-profits-4th
J.P. Morgan | Official Website. (n.d.). Www.jpmorgan.com. https://www.jpmorgan.com/global
JPM Dividend Yield, History & Payout Ratio (JPMorgan Chase & Co.). (2022, March 25). Www.marketbeat.com. https://www.marketbeat.com/stocks/NYSE/JPM/dividend/
Norrestad, F. (2021, May 27). JPMorgan Chase: number of employees 2020. Statista. https://www.statista.com/statistics/270610/employees-of-jp-morgan-since-2008/#:~:text=The%20number%20of%20JP%20Morgan%20Chase%20employees%20has
Gregory,
Your milestone carries a very interesting aspect as the business is directly linked to the profit of the country and the individuals that reside in it. When a countries GDP and stock markets take a downturn, banks can struggle even more than other businesses. This can be a result of lowered spending from individuals or a general uneasiness about the financial status of the country. One recent instance of severe economic downturn was during the Cvid-19 pandemic. How did JP Morgan fair during this time of unrest?
Overall you did a very good job and i look forward to the rest of your posts!