Cheap Money: JPMorgan wants to open 2,000 new branches, be the largest US bank
Right now, Wells Fargo is the largest US bank by branch locations (somewhat surprising to those from the East Coast). It has 6,314 branches. BoA, which has nearly twice the assets of Wells Fargo, has 5,856 branches, and is planning on closing 10% of those to cut costs.
JPMorgan currently has 5,268 retail branches, the third-largest network in the U.S.
However, it plans on opening 2,000 more. JPMorgan's five-year strategy calls for 525 to 700 new outlets in California, 375 to 500 in Florida, and an additional 800 elsewhere.
That is a huge number of branch locations. In addition, they are spending a lot of money on trying to attract retail banking accounts.
The big question is of course... why? JPMorgan is not known as a retail-focused bank. They are however the largest bank in United States by sales, profits, assets and market value. They have the largest hedge fund arm of any bank (thanks to the Bear Stearns buyout) at over $50billion in assets.
But it seems that the purchase of WaMu has put JPM on a quest for retail dominance. Which sounds about as exciting as trying to conquer Asia in Risk.
But there is a solid logic behind it, which I must say that many analysts disagree with.
What the big banks found out during the debt crises is that if you are highly leveraged (as in - you are a modern bank) and if you are running lots of derivative assets and the crap washing across your books looks worse than the decks of a Japanese whaling vessel, you need some access to cheap cash. Now, you are a bank, so most of the time you can go to other banks. But when every other bank has similarly been caught with their hand in the cookie jar, you had only one option, and that was to go to the US government. Now, because this is JPMorgan, that likely means going over to your former boss/colleague/co-worker and asking for money... but its still a little undesirable. Asking for money from the government is close to admitting complete failure. Not to mention all of those restrictions the government puts on the money.
So JPM has struck on an age old solution to cheap cash: Gradma. By going after California and Florida they are intentionally targeting retail areas where keeping money in a checking account might actually still happen.. because old people keep their money in checking accounts, bank accounts, CDs etc etc. Younger people either keep their money in higher yield online banking accounts, stock market accounts, or--lets be honest here--they have no goddamn money at all and are living hand to mouth.
So basically JPMorgan is hoping that Granddad handshake where he has the $10 bill cupped in his hand for your birthday is going to be their cheap access to cash. The question though is at what cost - 2,000 branches is a hell of a lot. However it works out, an interesting play.
JPMorgan currently has 5,268 retail branches, the third-largest network in the U.S.
However, it plans on opening 2,000 more. JPMorgan's five-year strategy calls for 525 to 700 new outlets in California, 375 to 500 in Florida, and an additional 800 elsewhere.
That is a huge number of branch locations. In addition, they are spending a lot of money on trying to attract retail banking accounts.
The big question is of course... why? JPMorgan is not known as a retail-focused bank. They are however the largest bank in United States by sales, profits, assets and market value. They have the largest hedge fund arm of any bank (thanks to the Bear Stearns buyout) at over $50billion in assets.
But it seems that the purchase of WaMu has put JPM on a quest for retail dominance. Which sounds about as exciting as trying to conquer Asia in Risk.
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| Never, ever try and capture Asia.. |
What the big banks found out during the debt crises is that if you are highly leveraged (as in - you are a modern bank) and if you are running lots of derivative assets and the crap washing across your books looks worse than the decks of a Japanese whaling vessel, you need some access to cheap cash. Now, you are a bank, so most of the time you can go to other banks. But when every other bank has similarly been caught with their hand in the cookie jar, you had only one option, and that was to go to the US government. Now, because this is JPMorgan, that likely means going over to your former boss/colleague/co-worker and asking for money... but its still a little undesirable. Asking for money from the government is close to admitting complete failure. Not to mention all of those restrictions the government puts on the money.
So JPM has struck on an age old solution to cheap cash: Gradma. By going after California and Florida they are intentionally targeting retail areas where keeping money in a checking account might actually still happen.. because old people keep their money in checking accounts, bank accounts, CDs etc etc. Younger people either keep their money in higher yield online banking accounts, stock market accounts, or--lets be honest here--they have no goddamn money at all and are living hand to mouth.
So basically JPMorgan is hoping that Granddad handshake where he has the $10 bill cupped in his hand for your birthday is going to be their cheap access to cash. The question though is at what cost - 2,000 branches is a hell of a lot. However it works out, an interesting play.
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