Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / How JPMorgan Is Winning the Bank Megacap Race
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- Lucas: JPMorgan Chase is up about 0.8 percent this week. That might not sound like much, but compare it to Microsoft, which fell 2.8 percent, or Alphabet, down 1.4 percent. The bank megacap is quietly beating big tech, and I think there's a specific story here about who's grabbing market share in financial services. Luna: It's not just JPMorgan, either. Bank of America is up 1.1 percent, Chevron up 3 percent. There's a rotation happening. But why JPMorgan specifically? Lucas: Right. So JPMorgan is the biggest bank by assets, but its stock isn't just riding the sector. It's gaining share in investment banking fees, wealth management, and even corporate lending. Goldman Sachs just announced it won $70 billion in asset management mandates from Verizon and Lockheed Martin, which is huge. But JPMorgan's model is more diversified—it has a giant consumer bank, a credit card business, and a trading operation that all feed each other. Luna: So you're saying JPMorgan's advantage is that it's a one-stop shop while Goldman is more of a specialist? Lucas: Exactly. Goldman is winning big mandates, but JPMorgan is winning the steady incremental business. Its net interest income—that's the spread between what it pays depositors and what it earns on loans—has been expanding even as the Fed holds rates steady. The bank has been able to keep deposit costs low while earning higher yields on its securities portfolio. That's a structural edge. Luna: And that matters especially now, because the Fed minutes from June showed the committee was split on the direction of rates. Some officials wanted to cut, others wanted to hold. Uncertainty usually benefits the big, well-capitalized banks because they can weather whatever comes. Lucas: That's a great point. JPMorgan's 'fortress balance sheet'—CEO Jamie Dimon's phrase—has allowed it to keep lending when smaller banks tighten. In the first half of this year, JPMorgan grew its commercial loan book while many regional banks pulled back. That market share gain will show up in earnings for quarters. Luna: Dimon has been publicly cautious about the economy, though. He's been saying there are still risks from inflation and geopolitics. How does that square with the stock's performance? Lucas: I think the market sees his caution as credibility. He's not sugarcoating, and that actually builds trust. Look at Berkshire Hathaway—Buffett has been sitting on a record cash pile, warning about valuations. The stock hasn't suffered for it. Dimon is similar. Investors know he's not going to take stupid risks. Luna: So what's the concrete number that matters this quarter for JPMorgan? Lucas: I'm watching its net interest income guidance. Last quarter, they guided for around $90 billion for the full year. If they raise that, it signals the loan book is growing and deposit costs are staying low. Separately, investment banking fees were up about 20 percent year over year last quarter. If that continues, it shows M&A and IPO activity is coming back, and JPMorgan is capturing its share. Luna: And Goldman's $70 billion mandate suggests the fee pool is expanding. But are there risks? If the Fed cuts rates aggressively, JPMorgan's net interest margin could compress. Lucas: That's the main risk. If the Fed cuts 50 or 75 basis points in the second half, the spread narrows. But JPMorgan can offset that with higher fee income. The bank has been investing in its wealth management and asset management arms. They're not just a loan shop anymore. And the dividend yield is around 2.5 percent, so you get paid to wait. Luna: I want to tie this back to stock picking. If you're building a concentrated portfolio of, say, ten to fifteen stocks, does JPMorgan make the cut over, say, Bank of America or a tech name like Apple? Lucas: It depends on your time horizon. Over the next twelve months, I'd say yes. The rotation into value and financials has momentum. JPMorgan has the scale, the management, and the market share story. Apple is up 1.9 percent this week, and its services margin story is strong, but its growth rate is single digits. JPMorgan's earnings per share could grow 10 to 15 percent this year if fee income rebounds. That's a compelling risk-reward. Luna: And you get the defensive aspect. In a downturn, JPMorgan's loan loss provisions go up, but it's so diversified that it rarely loses money. It earned a 17 percent return on tangible equity last year. That's best in class. Lucas: That's the key metric. Return on tangible equity, or ROTE. JPMorgan targets 17 percent, and they've been hitting it. For context, the average big bank is around 12 to 14 percent. That premium reflects the market share gains and the management quality. Luna: You mentioned management quality. Dimon is 70, and succession is always a question. Does that worry you? Lucas: It's a risk, but the bench is deep. They've groomed several potential successors—Marianne Lake, Daniel Pinto—who have been running major divisions. I don't think the stock would crater if Dimon stepped down tomorrow. The culture is embedded. Luna: So for the listener who wants to research this further, what's the one thing they should look at? Lucas: Pull up JPMorgan's quarterly earnings supplement. Look at the slide on 'market share'—they show their share of U.S. deposits, credit card spending, and investment banking fees. If those numbers are going up quarter after quarter, that's the long-term thesis. The rest is noise. Luna: You know, it's funny—we spend so much time talking about tech and AI stocks, but the biggest bank in America is quietly putting up numbers that most companies would envy. And we get to talk about this without any ads or sponsors pushing us to recommend anything. That's one reason we do this show the way we do. Lucas: Absolutely. We keep the conversation independent because we think that's more useful for you. If you find value in that approach and want to support it, the link is buy me a coffee dot com slash fexingo. No pressure, but it helps us stay ad-free and focused on the numbers that matter. Luna: And we appreciate everyone who's already done that. It lets us dig into stories like JPMorgan's market share gains without worrying about pleasing a sponsor. Lucas: So to wrap this up: JPMorgan is a case study in how a well-run bank can use scale and diversification to gain share even in a slow-growth environment. The net interest income story, the fee rebound, and the fortress balance sheet all point to an institution that's built to compound. If you're looking for a core holding in the financial sector, it's hard to argue against it. Luna: Great conversation. Next time, we'll look at another stock that's benefiting from the rotation. Until then, keep picking.