D. Main Point Discussion:
The American banking system was left in shambles by the 2007-2008 financial crisis; investment banks were mostly affected. One standalone investment bank that remained and survived that figurative carnage was JPMorgan. On October 2015, the financial company competed in Wall Street. JP Morgan competition in the hugely lucrative fell behind, which was ultimately disastrous, and business of selling mortgage securities. In the 1980’s analysts within JP Morgan identified key problems in bringing financial innovation to the mortgage market. This assisted the company to resurface after the financial crisis. The two institutions aimed at maximizing profits in their business activities. JP Morgan considers factors such as revisiting of the debt strategies, upgrade of new technology advancement systems, improvement of fraud prevention and deployment of analytics (Madura, 89).
Currently JPMorgan Chase & Co. has a variety of business activities, consumer, mortgages, car, auto and merchant services. There is also a subcategory of student loans. Consumer and community banking gave JPMorgan Chase a net profit of $11 billion in the year of 2013. It was an increase of 2% compared to the year of 2012. In 2013 the institution earned $8.6 billion of $34 billion on revenues from corporate and investment banking. JPMorgan Chase & Co. made from its asset management operations just over $2billion, and that's of $11billion on revenues. The corporate and investment banking sector makes more than the asset management of JPMorgan Chase's business. It does attract a certain high profile clientele have a reliable property management department. Commercial banking represents a small part of the institution in that in 2013 the sector turned a slightly low profit of $2.6 billion in comparison with the previous year.
JPMorgan Chase is a complex organization thanks largely to their sizable Wall Street operations namely, investment and trading banking. Wells Fargo is simpler and easier to manage because focused on traditional commercial banking. Wells Fargo weathered the financial crisis of 2007-2008 better than many of its big competitors. Its ability to balance and manage risk against the ever-present desire gave it a rapid revenue growth. Currently, The Wells Fargo & Company reported a $5.8 billion profit, which is an increase of 1.2% in the year of 2014. Analysts that year were expecting revenue of $21.76 billion, but it rose from $21.88 billion from $21.21 billion.
Asset Management
Asset management is when a financial institution company manages a client’s investment. The company will on the behalf of the clients invest and give them access to a wide range of alternative and traditional product offering that wouldn't be available to the average investor. This service due to its expense is restricted to high net worth individuals, corporations', governments and financial intermediaries. The products of asset management include fixed income, equity, real estate, international investments and agriculture. When money is deposited into by individuals into the account, it is put in a money market fund that gives greater returns that can be found in checking accounts and regular savings (Madura, 58). The added advantage is that individuals can do all their investment and banking at the same institution instead of having a brokerage account and bank at two different companies.
Investment Discipline
Investment discipline is the obligation of institutions and banks to manage the risks of stakeholders in the course of their daily operations. JPMorgan gave a publicly available operational and financial documentation in line with federal regulations so as to ensure disclosure of information and financial transparency (Hunt, 26). In so doing, the company assumes dangerous or excessive risk levels. Doing so would compromise the interests of existing clients and effect on their ability to make loans.
Credit Rating
The credit rating of the two institutions, which is the assessment and analysis of credit worthiness in light of a borrower and on a particular financial obligation or debt, went down. The assessment looked at the history of the companies’ that had been affected by the financial crisis to come up with a credit rating.
Conclusion
In comparison, both institution firms have been able to maneuver the market and at current date enjoying good profits. The analysis and numbers are promising a better curve for these firms if the present factors in the market are kept constant. JPMorgan has strengths in that it is the largest lender and if it were to run into trouble it would be able to bailout. Currently its weakness may be that it is subject to capital requirements that are stricter because it’s the biggest banks compared to its competitors. The bank has huge deposits, thus making it a source of cheap money that it can use to fund its businesses or make loans. The threats that it faces is that continued low interests reduce the profit that it collects on the disbursed loans.
Wells Fargo is currently the fourth largest holding company. It has grown after the financial crisis to have 80distinct services. The fact that this company reported a $5.8 billion profit, which was an increase of 1.2% in the year of 2014 shows its ability after the financial crisis. Analysts that year were expecting revenue of $21.76 billion, but it rose from $21.88 billion from $21.21 billion. The Wells Fargo company is thriving and is currently a large mortgage lender.
Works Cited
Hunt, Ben, Chris Terry, and Ben Hunt. Financial Institutions and Markets. Melbourne: Nelson Thomson Learning, 2002. Print.
Madura, Jeff. Financial Markets and Institutions. Mason Ohio: Thomson, 2008. Print.
