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Jamie Dimon makes renewed pitch for JPMorgan to be valued like a subscription service — and it shows how Wall Street is trying to echo Big Tech


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Jamie Dimon makes renewed pitch for JPMorgan to be valued like a subscription service — and it shows how Wall Street is trying to echo Big Tech

The JPMorgan Chase CEO sounded a familiar note on Tuesday on a call with journalists when he casually compared his bank to competitors in Silicon Valley.Answering a question about whether the bank’s stellar performance has driven its stock price as high as it will go, Dimon said one aspect of its revenue — much of…

Jamie Dimon makes renewed pitch for JPMorgan to be valued like a subscription service — and it shows how Wall Street is trying to echo Big Tech
  • The JPMorgan Chase CEO sounded a familiar note on Tuesday on a call with journalists when he casually compared his bank to competitors in Silicon Valley.
  • Answering a question about whether the bank’s stellar performance has driven its stock price as high as it will go, Dimon said one aspect of its revenue — much of it being very stable — is similar to a subscription-based model that’s being valued at 10 times revenue.
  • Dimon’s comment shows how bank leaders are trying to make a case to an investing community in love with the tech sector that they have some of the same characteristics.
  • Click here for more BI Prime stories.

Jamie Dimon may have just a tiny bit of tech envy. 

The JPMorgan Chase CEO sounded a familiar note on Tuesday on a call with journalists when he casually compared his bank to competitors in Silicon Valley. Answering a question about whether the bank’s stellar performance has driven its stock price as high as it will go, Dimon said one aspect of its revenue — much of it being very stable — is similar to a subscription-based model.

Investors typically value banks like JPMorgan on the basis of tangible book value, which measures the difference between the value of its assets and liabilities. Tech firms and other industries, on the other hand, are often valued on the basis of revenue. The reason, put simply, is much of a bank’s business is based on taking deposits and making loans, which are held on its balance sheet, whereas subscription-based licensing models are seen as sticky and easy to scale to new clients without incurring new costs.

JPMorgan’s stock is now trading at two times the bank’s tangible book value, a rich valuation that has led some to question whether the stock price can go higher. It can, according to Dimon, if investors come to realize how much of the bank’s revenue is steady from one quarter to the next.

“We don’t worry that much about the stock price,” Dimon said. “It fluctuates; it goes up or down, and obviously we think it has value here,” he said, adding “a lot of our earnings are pretty stable, and yes, we have some episodic earnings, but some of them are actually very, very stable. It’s akin to a subscription business that people are paying 10 times revenues for.”

Wall Street banks like JPMorgan are often criticized for the black-box nature of their investment-banking business, where trading or underwriting results can swing wildly from one quarter to the next. But JPMorgan also has a massive consumer-banking arm that collects loan payments each month or clips swipe fees when customers use its credit cards. A wealth- and asset-management unit also adds stability to its quarterly results. 

Dimon’s comment is the latest attempt by bank leaders to make a case to an investing community in love with the tech sector that they have some of the same characteristics.

Goldman Sachs CEO David Solomon and other senior execs have talked about what it may mean as Goldman transitions investment-banking clients onto tech platforms that look and feel more like tech businesses.

Wall Street, for example, is exploring ways to offer subscriptions around securities research or trading data. 

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The big banks aren’t the only ones trying to persuade investors to see their business differently than they have in the past, and history suggests the sales pitch will be difficult. 

In the years since the financial crisis, a generation of financial-technology startups such as LendingClub Corp. and Prosper Marketplace persuaded investors to think they should be valued more like tech firms because they were acting like exchanges or marketplaces rather than banks. But when LendingClub ran aground in 2015 when lenders on its platform backed away, investors changed their minds and began to value the companies like lenders. 

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