Intro: Chase vs Bank of America


Of the “big four” banks in the U.S., Bank of America Corporation (NYSE: BAC) and JPMorgan Chase & Company (NYSE: JPM) reign supreme. A strong case could be made in favor of either one in the Bank of America vs. Chase Bank debate.

Although the most recent Acuity rankings show JPMorgan Chase at a slight advantage (JPMorgan Chase is ranked number six worldwide, while Bank of America Corporation comes in at number twelve), both are time-honored financial firms that offer commercial, retail, and investment services. Forbes also ranked both banks in the top 100 largest American banks.

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Image Source: Chase vs. Bank of America



After the financial crisis of 2007-08, both BAC and JPM were able to recover by expanding their assets and acquiring other companies. BAC took over Countrywide Financial and Merrill Lynch & Company, whereas JPM saved Bear Stearns & Company from the brink of bankruptcy.

Because of the altered landscape of finance after the collapse, Forbes changed their ranking methodology to better reflect the reality of banking in the 2010s—adding new criteria to the Bank of America vs. Chase argument.

The new criteria saw a dropped return on average equity as well as a decrease in the percentage of nonperforming loans. In addition, Forbes’ added supplementary metrics such as average tangible common equity, return on average assets, and net charge-offs.

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Bank of America Review

In a Bank of America review, it is crucial to note that after the corporation’s procurement of Merrill Lynch in 2008, it grew into the leading wealth management company internationally. Its retail branches reach all 50 states, which gives it the advantage of one of the big four U.S. banks with $2.1 trillion in total assets. BAC also operates in over 40 countries worldwide.

One argument in favor of Bank of America when considering Chase vs. Bank of America is that their earnings per share growth rate, price-to-book value, and latest top-line growth allowed the company to earn a second quarter EPS of 45 cents in 2015. Because of this benchmark, it outperformed estimates by nearly 30%.

In addition, because BAC offers the lowest price-to-book ratio of all U.S. banks (0.71), it’s able to attract valuable investors. Finally, the stock buyback of almost $1 billion in 2015 indicates increasing investor confidence on profitability.

When considering dividend yield, however, BAC comes in significantly lower than JPM, giving a 1.28% yield. And lastly, between 2010 and 2015, BAC advanced by 25%, a trend continuing into 2016, while JPM stock saw an impressive 50% increase.


Chase Bank Review

As the fourth largest bank (considering assets) internationally, JPMorgan Chase & Company boasts total assets of $2.7 trillion. It operates in over 70 countries worldwide. Any Chase Bank review needs to acknowledge that after the merger of JPM and Chase Manhattan Bank in 2000, the company reorganized operations to include the following four divisions:

  • asset management
  • corporate and investment banking
  • consumer and community banking
  • commercial banking

When making a case in favor of JPM stock or conducting a Chase Bank review, analysts and investors can cite JPM’s operating margin, assets, and returns. Of the four big banks, its total assets are the highest, as previously mentioned. It also has BAC beat in the return on assets — 0.91% in comparison to BAC’s 0.6%. In term of operation efficiency, JPM operates at a profit margin of 24%, while BAC is at 13%. JPM also scores higher by the quick ratio — one of the most reliable financial security indicators — where it measures 0.93. JPM, although close, is at 1.01 in the 2015 data. Finally, the return-on-equity ration suggests that JPM returns 10.65%, a more remarkable percentage than BAC’s 5.62%.

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The Details of Chase vs. Bank of America

Ultimately, the decision of Chase Bank vs. Bank of America, the biggest banks in the U.S., is a matter of preference. However, it is worth considering how their approach to investment differs. According to financial experts, the two banks approach investment with distinctive points of view that hail from the financial crisis. 

First, BAC came very close to folding after the crisis. Because it has acquired Countrywide Financial, which mainly facilitated hasty bets in the subprime mortgage marketplace, BAC took hits upwards of $200 billion in losses. Consequently, BAC spent a number of years after the crisis in recovery mode.

Conversely, JPM actually benefited from the crisis due to its acquisition of Washington Mutual and Bear Stearns at discounted rates. These two additions to JPM’s profile boosted its numbers of retail branches as well as investment opportunities. The result is that JPM comes out ahead in the Chase vs. Bank of America race.

The resulting numbers emerging from these two recovery narratives are persistently reflected in the banks’ stock value, even today. Whereas Chase stock sells around 100% of its book value, Bank of America is consistently traded at around a 40% discount.

Considering this information, one might assume that JPM is the clear winner in the Chase vs. Bank of America debate. In many scenarios this is, in fact, correct. Because most banks trade at one or greater times their book value, BAC stock is a prudent buy in terms of valuation. There is also evidence to suggest that this bank will meet the standard trading valuation in the future, although progress is slow (data from March, 2016 show BAC’s return on assets at 0.72%, as opposed to the industry standard of around 1%).

The choice depends on your investment goals. If you’re in the market for stock that will produce high return in the short run (10-20 years), JPM is the safest option. These stocks will yield higher returns and annual growth rate in the near future.

In summary, when deciding between Bank of America vs. Chase Bank, if your goal is to buy low and you have time to wait, Bank of America might be the way to go. But if you want returns straight away, JPM Chase is the prudent choice.

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Innovation

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Image Source: Bank of America vs. Chase

While choosing between Chase and Bank of America might encompass the concerns outlined above for investors, the average consumer cares more about issues such as usability. For the purposes of this article, the usability of the bank apps will act as a case study in determining the debate between Bank of America vs. Chase. What are these banks doing, usability-wise, to attract customers?

First, for Bank of America customers, the mobile banking app is available both on Apple and Android platforms. It is worth noting, however, that in early 2015 BAC discontinued their app on Windows platform.

The BAC mobile app has most of the functions available from their desktop website. You can check your balance for any accounts you may have, including investment accounts via Merrill Lynch. The platform also allows the client to set up alerts, schedule bill payments and order replacement cards.           

One of the most used and exciting functions of mobile banking apps is the deposit check function, and the BAC developers were quick to jump on this bandwagon. In addition, the platform makes it easy to send money directly from your phone, provided the receiving client has also set up their account accordingly.

The user has the choice to enter the name and email address of the receiver manually or set the app’s permissions to input the details from their contacts list. In order to receive email money transfers or direct bank transfers, the client must add their email address or cellular details and verify with an enrollment code sent via text message.

One noteworthy feature included in the BAC app is a feature designed for assisting travelers. Have you ever neglected to contact your bank to notify them of your travel plans? Has this resulted in your transaction being labeled as suspicious, a suspension of your banking access, or resulting inconvenience? If so, you’re not the only one. Now, BAC mobile users can set up notifications through the app, rather than calling. Imagine rushing for a flight and being able to take care of this worry while waiting in line at security, for example. This feature, although already in place for online bankers, is now more usefully available on your mobile device.

In comparison, Chase’s mobile app offers many of the same features with some notable differences. It’s also offered on both Apple and Android, with their previous Windows phone accessibility having been abandoned. The standard mobile banking app features are all available, from balance and transaction records, scheduling money transfers, and setting up phone alerts regarding payments (it is worth mentioning that the app does not include a built-in check deposit feature and requires the client to sign up for Chase QuickDeposit or Chase Quickpay).

One of the most useful alerts functions is an Instant Accounts Alert that can be sent via SMS to alert of overdraft fees before they are applied. This alert simply notifies the client when their balance is low, allowing them to make a transfer by replying to the text with the letter “T” followed by the dollar amount of the transfer.

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Conclusion

Both apps are fairly user-friendly and easy to navigate, even for a novice mobile banker. The Chase app offers a bit more in terms of features; the BAC app has certain confines and still requires a visit to the standard website to fulfill certain functions, such as wire transfers.

The Chase app offers more flexibility in mobile functions. For example, Chase allows their users to opt-in to a feature that allows viewing of account balances by swiping the screen and bypassing the log in details for those who regularly check their balances.

To conclude, although JPM weathered the financial crisis with more resilience, investors deciding between the two banks should consider their needs and expectations before making a final decision. In considering Chase Bank vs. Bank of America, there is a case to be made for either, depending on your financial goals.

For the average banker, however, there are other considerations, such as usability, innovation and customer service. Though this article did not touch on every aspect of the customer experience, there are many online sources and consumer reviews available for the savvy banker to consult. The decision lies in the hands of the individual and should be decided based on their needs.

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