There are two key reasons to own JP Morgan now: rising interest rates and new banking technology.
In years to come, interest rates in the US are set to rise slowly, as financial markets return normality after the aggressive interventions of the US Federal Reserve in the meltdown of 2008/09. Rising interest rates are good for banks, as it allows to them to fatten up their margins, making a little more money on interest charged on loans to their customers.
New banking technologies are also good for bank profits. Pushing customers to use online tools and mobile applications, instead of paper cheques and bank branch visits are hugely helpful. JP Morgan also recently acquired a leading payment technology company, WePay to improve its credit and debit card processing capabilities and reduce fraud.
There are on going initiatives by JP Morgan to modernise its core banking functions by greater use of cloud hosting, data analytics, artificial intelligence, and blockchain technologies. These projects will also reduce costs and improve profits. Perhaps even more importantly, such system improvements reduce the scope for fraud and lower internal risks. These two problems are the source of most bad debts and credit losses.
In summary, we feel that JP Morgan has significant upside at current levels (around $102 per share). It's the highest quality stock in the preferred sector, which is how Vestact likes to be positioned.