Welcome back to “Investment Banking Insights” with Fabrizio Allegra. Our focus remains consistent in this issue: to provide crucial insights and information for conquering finance interviews. In this article, we will be discussing JP Morgan Chase & Co, which is an American multinational finance company headquartered in New York City. It is the largest bank in the world by market cap and largest in the US by assets under management (AUM).

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Exploring the Foundations: JP Morgan’s Assets Under Management

In this edition of 'Investment Banking Insights,' we shift our gaze to one of the behemoths of finance: JP Morgan. According to JP Morgan’s asset management page, JP Morgan has over $2.9 trillion AUM as of December 31, 2023, making it the largest bank in the US. A substantial part of these assets are held in liquidities ($1.049 trillion). This asset class refers to assets that are easily convertible to cash without significantly affecting their market price. In this case, money market funds are the bulk of this asset class. This includes treasury securities, prime money market funds, and U.S. government market money funds.

Furthermore, equities ($835 Billion) also hold a large grasp on the AUM of JP Morgan. Their largest holdings are MSFT, NVDA, & SPY. One featured equity fund is the large-cap growth fund. This fund invests in America’s largest cap companies and seeks to gain the return potential from large, fast-growing companies. Additionally, their equity sector includes international funds. These funds focus on maximizing returns from a portfolio of foreign companies and through emerging market equities.

In addition to equities and liquidity, fixed income also takes up around a third of their AUM, totaling $753 Billion. Fixed income is divided into 3 different parts; extended sectors, core complements, and core holdings. The extended sectors strategy is to provide higher returns but may be more volatile. This includes bank loans, high-yielding bonds, and emerging markets. Core complements seek reduced fixed income volatility through absolute return, inflation hedge, and ultra-short investments. Lastly, their core holdings (which serve as a backbone of fixed income ) seek lower volatility as a result of diversification. This is achieved through high-quality short/intermediate terms, diversified portfolios, sector-specific areas, and active management.

JP Morgan Chase & Co. Income and Revenue

JP Morgan’s net revenue in Q1 2024 was $42.5 billion, up 8% from the previous quarter. A large portion of this revenue ($23.0 billion) comes from net interest income (NII) which is the interest-earning assets such as loans. The increase in NII is most likely a factor of higher rates and a change in the bank’s balance sheet mix. The composition of JP Morgan’s assets and liabilities and asset allocation might have assisted this drive in revenue.

In addition to NII, their non-interest revenue was $19.3 billion, up 5% from last quarter. This, in part, can be attributed to their corporate and investment bank division. Within it, they provide solutions such as Mergers & Acquisitions, capital raising, and risk management. In their Q1 2024 earnings release, they reported that their investment banking revenue was $2.0 billion, up 27%, primarily driven by a 21% increase in fees. They also reported that their markets & securities services revenue was $9.2 billion, down 2%, a result of lower activity in rates and commodities compared to a strong prior year. The rest of their revenue can be credited to commercial banking, asset & wealth management, and corporate. Additionally, First Republic Bank, which JP Morgan acquired in May of 2023, attributed $1.3 billion of net interest income. The acquisition contributed an upfront, one-time, post-tax gain of approximately $2.6 billion.

JP Morgan Chase & Co continues to assert its leadership in the global banking landscape, maintaining a formidable position at the forefront of the industry. With assets under management surpassing $2.9 trillion, JP Morgan exemplifies the scale and influence in financial markets. The firm’s commitment to innovation and client service is reflected in its consistent quarterly revenue growth, highlighting its persistence.

To conclude, JP Morgan continues to lead the banking world and financial markets.