Stock Market Series

How Do American Banks Compared to Canadian Banks (Part 1)?

In the past, we had evaluated the five biggest Canadian banks to see whether they all have durable competitive advantage.

But how about American banks?  Do they all have durable competitive advantage as well?

According to Bankrate, the five biggest American banks are JPMorgan Chase & Co., Bank of America, Wells Fargo, Citigroup and Goldman Sachs (it is a bank?).  Moreover, most of them (I think all) are in my Stock Watch List.

In this post, we will analyze the financial statements of JPMorgan Chase & Co. and Bank of America.

JPMorgan Chase & Co. is a U.S. multinational banking and financial services holding company headquartered in New York City.   It is the largest bank in the United States, and the world’s sixth largest bank by total assets, with total assets of US$2.55 trillion.  JP Morgan Chase & Co. offers banking solutions not only for personal banking customers, but also for institutions and businesses.

Here is the financial statement analysis of JPMorgan Chase & Co. from 2013 to 2016:

Screen Shot 2017-09-19 at 5.51.11 PM

If you forget how the above figures are generated, click here.

In general, JPMorgan Chase & Co. has durable competitive advantage because the company’s net earning is more than 20% on total revenue.  In addition, the company spend less than 15% of gross profit for interest expense.  Furthermore, its retained earnings increase every year.  Lastly, the company holds treasury shares.

However, I don’t think I would invest in JPMorgan Chase & Co. now because my annual return from dividends is only 2.07% if I buy the stock in its current price of $94.60.

What about Bank of America, the second largest bank in the United States with total assets of US$2.25 trillion?

Here is the financial statement analysis of Bank of America from 2013 to 2016:

Screen Shot 2017-09-20 at 11.18.04 PM

Ultimately, I do not think Bank of America has the same durable competitive advantage as JPMorgan Chase & Co. as Bank of America spends more than 35% on selling, general and administrative expense.  Furthermore, the company has a history of earning less than 20% of net income on total revenue.

I also would not buy any Bank of America stocks right now as my annual return from dividends is only 1.81% if I buy the stock at the current price of $25.06.

In the next post, we will analyze the financial statements ofWells Fargo, Citigroup and Goldman Sachs.  Please leave a comment below! Catch you on the flip side!

 

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