3. JPMorgan Chase & Co. (NYSE:JPM)
Number of Hedge Fund Holders In Q3 2024: 105
Date of Cramer’s Comments: 9-10-24
Performance Since Then: 17.32%
JPMorgan Chase & Co. (NYSE:JPM) is a global banking giant with total assets worth a whopping $4.1 trillion. It also has one of the most diversified revenue streams among its peers. JPMorgan Chase & Co. (NYSE:JPM) earns 48% of its revenue through non-interest income, and within this dollar amount, 30% comes from asset management and investment banking. As a result, even if lower rates hurt JPMorgan Chase & Co. (NYSE:JPM)’s interest income, it can make up for the drop by benefiting from growth in capital markets. Investment banking led to a 4.4% share price jump in October when fees from the division grew by 31% during the third quarter. JPMorgan Chase & Co. (NYSE:JPM)’s shares also jumped by 11.5% after the November election. Here is what Cramer said in September:
“Today, Daniel Pinto, JPMorgan Chase & Co.’s President and Chief Operating Officer, lowered the boom on the optimists who desperately wanted to buy something other than tech. The big bank told us that things are less bullish than we thought. There isn’t as much capital markets activity as we’d hoped this quarter, and most importantly, the estimates for next year are too high because of a likely miss on net interest income.
“The key metric for banks, one that analysts expect to be good when rates are coming down, is net interest income. In short, JPMorgan Chase & Co. is going to miss the numbers next year. If the “beacon of finance” can’t make the estimates, how the heck will anyone else? So, the stock comes down 5%, at one point even uglier, and the rest of the banks roll over.
“It gets worse. Last year, Pinto said the company was slated to spend between $1 billion and $2 billion on tech. This year, JPMorgan Chase & Co. is spending $2 billion, but a lot of that is related to cracking down on fraud. Great, that’s a deadweight loss for the bank—a must-spend with no real return on investment. There’s an opportunity for AI to help them cut costs, especially among the 100,000 to 250,000 people in call centers or doing other back-office jobs, what he calls “operational” roles. Now, many of these people will be “impacted”—which, I guess, is code for laid off. The rest will be part of what he calls “operational efficiencies,” meaning getting more productivity from the same people.
“The good news here is that at least JPMorgan Chase & Co. will have some lower expenses over the next three to five years. Given that everything else is going the wrong way, maybe someday, at some point, there will actually be a return on investment in AI. But you can’t just say that out loud because it would require admitting that a lot of “deadwood” is about to get chopped—and deadwood, of course, means people. Wall Street used to actually say stuff like that, but these days we come up with cleaner, more indirect euphemisms. “Hey, we don’t do layoffs anymore, we find efficiencies, we right-size the workforce.”
