Is the world's first trillion-dollar market cap bank on the horizon?

The world's first bank with a market capitalization exceeding the $1 trillion threshold may be about to make a historic debut...

In the past three months, JPMorgan Chase's share price has surged by 21%, largely driven by the boom in its trading and M&A businesses, which has pushed the bank to record-breaking profits. The largest Wall Street investment bank led by Jamie Dimon reached a market capitalization of $965 billion at the close of trading last Friday.

At present, Wells Fargo stated in its latest report that JPMorgan Chase, benefiting from multiple favorable factors, is expected to become the world's first bank with a market capitalization of $1 trillion.

Wells Fargo has given JPMorgan Chase an "Overweight" rating, and raised its target price for the stock from $375 to $390 — which implies an upside of more than 7% from last Friday's closing price.

Wells Fargo analyst Mike Mayo wrote in a client report, "JPMorgan Chase has an industry-leading capability in investing to achieve exceptional growth, which not only helps it cross the $1 trillion market cap threshold, but also is expected to sprint toward the $2 trillion target in the next 7 to 8 years."

Mayo added, "Over the past decade, JPMorgan Chase has demonstrated top-tier performance on both offense and defense: it has not only continuously expanded its market share in all core business segments, but also fully optimized its business structure. Compared with other global banks, its earnings performance is particularly robust, and it has successfully built the 'fortress balance sheet' defined by its CEO."

According to the financial report released by JPMorgan Chase last month, the largest Wall Street bank achieved the highest quarterly net profit in its history in the second quarter of this year — reaching $21.1 billion, up 41% year on year. The explosive growth of its equity trading business contributed greatly to this result. The bank's equity trading revenue surged 86% year on year to $6 billion in the quarter, which not only exceeded the highest expectation of industry analysts, but also pushed the overall trading business revenue to a new all-time high of $12.1 billion.

A $2 trillion market capitalization is no longer a distant dream?

Wells Fargo further pointed out that as JPMorgan Chase continues to increase its layout in high-growth business segments, it is not far-fetched for its market capitalization to cross $2 trillion in the next seven to eight years.

"The fundamental driving force to achieve the $2 trillion market cap target lies in the substantial growth of earnings per share (EPS), rather than simply relying on valuation re-rating," Mayo specifically noted when talking about valuation indicators such as the price-to-earnings ratio.

Mayo said, "JPMorgan Chase has built a self-sustaining positive-cycle flywheel effect, which keeps its 'Return on Tangible Common Equity (ROTCE)' significantly higher than its cost of equity."

He explained that the bank reinvests these excess returns in offline outlets, talent recruitment, fintech and international business expansion. Subsequently, these strategic investments are accurately translated into comprehensive expansion of market share — covering deposits, credit cards, capital markets and traditional banking businesses.

As Mayo put it: "JPMorgan Chase is pursuing growth in all dimensions, and its deposit business is no exception."

This optimistic forecast from Wells Fargo is highly consistent with the mainstream consensus on Wall Street. Statistics from LSEG show that among the 26 analysts covering JPMorgan Chase, a total of 15 have given positive ratings of "Buy" or "Strong Buy".

This article is from the WeChat Official Account "Cls.cn", author: Xiaoxiang, published by 36Kr with authorization.