JPMorgan Chase(NYSE: JPM) is a massive financial institution with more assets than any other U.S. bank and an $804 billion market cap. To be perfectly clear, it is a remarkable business with fantastic leadership.
Having said that, while I think JPMorgan Chase will continue to grow over the coming years, I don’t necessarily think it will be on top of the industry forever. While there’s no way to know what the banking industry or U.S. economy will look like in a couple of decades, there are some companies that have massive opportunities and the potential to grow rapidly.
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I realize this is a bold prediction. There’s a lot that needs to go right for any other bank stock to get close to JPMorgan Chase’s market cap. But if we’re looking at a time frame of 20 years, these two have a better chance than many experts think.
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A highly profitable bank with some interesting possibilities
As of this writing, Capital One(NYSE: COF) has a $135 billion market cap, so it would have to outpace JPMorgan Chase by about 500% to overtake it. But in a 20-year period, that’s certainly within the realm of possibilities.
For one thing, Capital One doesn’t necessarily need to grow its business to the size of JPMorgan Chase. Because of its credit card and auto lending focus, Capital One has far better net-interest margins. The bank has done an excellent job of innovating and is the third-largest player in the credit card industry with about $850 billion in credit card purchase volume last year. But after its recent acquisition of Discover, it has the number one share in credit card loans. Over the past decade alone, Capital One’s credit card spending volume has more than tripled, so there’s excellent growth momentum here.
Furthermore, Capital One has about $470 billion in total deposits, about one-fourth of what JPMorgan Chase has today. Capital One has done an excellent job of not only modernizing the branch-based banking experience but has also been the first major bank to offer high-yield deposit products to branch customers. I could see its deposit growth outpacing its big-bank competitors over the coming years.
Finally, one factor that could help catapult Capital One to the next level is that it is now the only large U.S. consumer-facing bank to have its own payment network. At first, this will be mostly useful to avoid paying companies like Visa and Mastercard interchange fees on its own card products, but over time there could be interesting possibilities to build out the Discover network as a truly competitive alternative to the payment-processing giants.
An app that could replace your bank, broker, and more
The Capital One prediction is certainly bold, but there’s a clear path to get there, especially if the Discover network truly gains traction as a globally competitive payment network. But this next one is…
Read More: Bold Prediction: 2 Bank Stocks That Will Be Worth More Than JPMorgan Chase
