An interesting comparison between Bank of America and JPMorgan Chase


If you want to understand Bank of America (NYSE: BAC) and JPMorgan Chase (NYSE: JPM), or any bank for that matter, then you need to get a feel for the type of loans they are holding in their portfolios. Perhaps more than anything else, a bank’s loans shed a revealing light on how it makes money.

When it comes to JPMorgan Chase and Bank of America, two general points stand out when you compare their similarly sized loan portfolios, the components of which are broken down in the following table:

Type of loan

Bank of America (millions)

JPMorgan Chase (millions)

Residential mortgage

$ 187,911

$ 192,714

Home equity

$ 75,948

$ 60,548

Credit card

$ 99,577

$ 131,463

General consumer

$ 92,733

$ 91,559

Commercial & Industrial *

$ 389,633

$ 224,080

Commercial real estate

$ 57,199

$ 95,413

Financial institutions

N / A

$ 29,896

Government agencies

N / A

$ 11,626


$ 903,001

$ 837,299

* Also includes smaller categories of commercial loans. Data source: Bank of America and JPMorgan Chase.

The first is that JPMorgan Chase has a larger consumer loan portfolio than Bank of America, at $ 476 billion and $ 456 billion, respectively. This is surprising considering that JPMorgan Chase is, by and large, a Wall Street company, while Bank of America has long been known as a retail bank.

JPMorgan’s consumer loan portfolio is bigger because it has a bigger credit card portfolio – and the difference is not insignificant. At the end of last year, its $ 131 billion in credit card loans were 32 percent larger than Bank of America’s $ 99 billion portfolio.

Other than home equity loans, where Bank of America has a 20% lead over JPMorgan Chase, the other categories of consumer loans are roughly equivalent. This includes senior residential mortgages and general consumer loans such as auto loans as well as margin loans in brokerage accounts.

Data source: Bank of America and JPMorgan Chase. Chart by author. As of December 31, 2015.

Commercially, by contrast, Bank of America’s loan portfolio is nearly a quarter (24%) larger than that of JPMorgan Chase. And if you break down their trading portfolios further, the differences become even more apparent.

Bank of America has a significant lead when it comes to general commercial loans (C&I loans and others). It had $ 390 billion in those loans at the end of last year, compared to JPMorgan Chase’s $ 224 billion. Suffice it to say, this is why Bank of America leads the way when it comes to commercial loans more generally.

However, the roles are turned when you look at commercial real estate loans. JPMorgan Chase leads this category, with $ 95 billion in loans compared to Bank of America’s $ 57 billion. In addition to this, JPMorgan Chase also has a substantial portfolio of loans to financial companies – likely due to its correspondent banking business combined with money loaned to brokerage houses and institutional investors, such as funds. speculative.

Taken together, these comparisons show that it is wrong to think of JPMorgan Chase as primarily a commercial bank, given that it has a larger consumer loan portfolio than Bank of America. It also shows that it is wrong to view Bank of America primarily as a retail bank, as its commercial and consumer loan portfolios are of the same size.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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