Financial Organization Analysis – Assignment Example
Running Head: J.P. Morgan business; A Swot Analysis. J.P. Morgan business. College J.P Morgan is a U.S multinational with a heavy presence in the financial sector; it is particularly conspicuous in securities business, investment services as well as retail banking. The institutions history dates back to the year 1799 when its very first predecessor was chartered. It has grown over time acquiring new partners thus strengthening its position to withstand the test of time and become what it is today; Sir J.P. Morgan become a senior partner in the year 1895 and the firm was renamed J.P. Morgan and Co. It acquired Bear Stearns Companies Inc in 2008 which further strengthened its capabilities in the wide range of business. In 2010 it fully took over ownership of J.O. Morgan Cazenove making it even stronger in terms of assets and capital. J.P. Morgan has positioned itself strategically as an institution building relationships with its target customer thus the slogan “The right relationship is everything else.”
J.P. Morgan as an institution targets mostly affluent investors who are both enterprises and individuals. It enjoys a strong brand, visibility and a stable financial base as well as a great presence across the world. It in fact has employed more than two hundred and fifty thousand people in the whole world. Strength involves its excellent services offered to customers owing to its extensive retail branch network. Products offered include agent lending, custody services, depository receipts, clearing, collateral management, financing & prime brokerage and fund management services. Its brand is heavily present in the business to business segment and this is a real plus on its image. More importantly it’s the biggest bank in America considering its sales, the market value, profitability and asset base. Weaknesses are also there despite its many strengths; it has continued over time to depend on the American units for profitability. There is also a growing amount of competition from other firms providing financial services and the market in the financial services keeps fluctuating thus not easy to forecast. Competitors include, ING, Prudential and wells Fargo groups.
Opportunities for J.P Morgan include; expanding into other markets in foreign countries with its strong brand as well as stable capital position. There is also a very great opportunities in diversifying product portfolios for the customer. This will reduce dependence on traditional products and business models thus check the threat posed by competitors. They also have an opportunity to have investments across the world under the auspices of the global stature. Opportunity also exists in increasing the commercial banking business and entering into more joint ventures. Two major threats are there to the business of J.P Morgan. These involve the ever changing industry regulations by government & financial crises in the form of recessions. The ever unstable market for mortgage business in the United States and across the world is another important threat to the business.
How J.P Morgan could capitalize on strengths to minimize weakness.
The corporation has a very firm financial base and this can be taken advantage of to minimize weaknesses by expanding and investing in foreign markets. Being the largest bank in the United States by profitability and asset base it should take advantage of this position to acquire more small firms and enter into more joint ventures so as to further consolidate the capital position. Diversifying products range will also help J.P. Morgan stand strong in the ever fluctuating market place as a well performing line will be leaned on incase another line is hit. The greatest asset lies in expansion and diversification as this will remove the complacency of depending on traditional products and banking models thus remain relevant in the fast changing global market as well as weather the ever increasing competition.
Existence of many regulations such as the home mortgage disclosure act, Equal Credit opportunity Act and lending limits put a heavy burden on financial institutions to comply. This threat is compounded by the fact that these regulations are ever changing and a financial institution may easily find itself in a legal suit. During the company’s announcement of its third quarter results the most important message was that it was not going to be profitable as should have been. This is majorly due to government regulations as well as the legal problems the company faces. The structure of the American government places financial institutions under regulation by many agencies. J.P. Morgan for instance is subject to regulations by OCC, SEC, CFTC, and FDIC at various levels putting in a huge burden that sometimes leads to losses (Murphy, 2013). Capital requirements, antimony laundering responsibilities and many other government regulations make it difficult financial institutions to smoothly carry on their business. The Volcker Rule which is part of Dodd-Frank Financial reform law places limits on how much one investment back may fund its own privately owned equity funds. It also puts restrictions on risky though profitable trading in which institutions use their internal funds to fund trades. These requirements forced the company to let its private equity ranch to become independent (Scott, 2013).
Financial institutions such as JPMorgan & Co. can minimize the impacts of regulation by ensuring strict adherence to the existing policies so as to avert possible legal suits that affect their capital positions. The pressure exerted by capital requirements can be weathered by holding an excess of the requirements as they did in anticipation of tough economic times ahead in the periods before recession. (Murphy, 2013). This is a very prudent step as for instance it assisted JPMorgan come out of the recession unaffected hence applied to requirements of government could be a very apt cushion. Another way to avert negative impacts of regulation is for JPMorgan working together with other financial institutions engage and negotiate with government to implement policies that make the business environment favorable.
1. Daniel Darst et al. (2009) Journey: Retirement Insights and Solution from J.P. Morgan. 1st Ed.
2. Edward V. Murphy. (2013). Who Regulates Whom and How? An Overview of U.S. Financial Regulatory Policy for Banking and Securities Markets. Congressional Research Service.
3. Scott Gamm. (2013). JPMorgan To Spin Off Private Equity Business As Volcker Rule Comes To Life. Forbes. Retrieved at http://www.forbes.com/sites/scottgamm/2013/06/14/jpmorgan-to-spin-off-private- equity-business-as-volcker-rule-comes-to-life/
4. Sital S. Patel. (2013). Superstorm of Regulation and Capital rules Forces J.P. Morgan to Retreat, Experts Say. The Wall Street Journal, retrieved at http://blogs.marketwatch.com/thetell/2013/10/11/superstorm-of-regulation-and- capital-rules- force-j-p-morgan-to-retreat-experts-say/