America’s 2 biggest banks started Y 2021 with the same book value, the 1st time that had happened since the 2008 financial crisis. But, the similarity ends there. Bank of America (NYSE:BAC) CEO Brian Moynihan reported his best return on equity to date, at 12% Thursday. JPMorgan’s (NYSE:JPM.) boss, Jamie Dimon managed almost 2X that.
A relative lack of risk shows up in Bank of America’s loan book and trading desks. Mr. Moynihan’s bank is 1/2 JPMorgan’s size in credit card lending, which brings in 4X as much revenue per USD lent as residential mortgages. Plastic money is supposed to be riskier. But credit cards have proved very resilient through the VirusCasedemic.
That metric is why both banks, and rival Citigroup (NYSE:C) have been able to claw back billions of USDs of provisions held aside for potentially delinquent customers.
Mr. Moynihan’s teams are also-rans in trading, mostly because they have less to play with. His equity and fixed income traders brought in $5.1-B in Q-1, whereas Mr. Dimon’s hauled in $9-B. The different appetite for risk shows up in the value at risk calculations.
JPMorgan has 4X as much at stake, though with less than 2X as much trading revenue. The Fed deems JPMorgan the more “globally systemically important” of the lenders.
JPMorgan trades at 2X its forecast book value according to Refinitiv, that is a 50% premium to Bank of America, and 1 that has been in place for most of Mr. Moynihan’s reign.
In theory, his conservatism ought to be rewarded when times get tough. But the Fed’s bold interventions in markets during the VirusCasedemic show that when times get bad, it’s the central bank that keeps the train running.
This economic boom may widen the gap.
Bank of America is more sensitive to rising long-term interest rates. But booming capital markets, aggressive corporate spirits and super consumer spending suggest it’s a great time to be a bank with credit cards, Top Tier dealmakers and aggressive traders.
JP Morgan Vs Bank of America? We like JP Morgan!
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