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MarketScreener Homepage  >  Equities  >  Nyse  >  JPMorgan Chase & Co.    JPM

JPMORGAN CHASE & CO.

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U.S. Banks, Card Companies Catch a Break in China Trade Deal

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01/15/2020 | 06:55pm EST

By David Benoit and AnnaMaria Andriotis

A trade deal with China has given U.S. banks and financial companies new hope that their decades-long attempts to crack the Chinese market may bear fruit.

The deal signed Wednesday clears some of the obstacles that have prevented U.S. banks, credit-card networks, insurance companies and distressed-debt investors from operating in China.

U.S. financial institutions have long talked up the prospect of China, where earning even a small share of the massive market could result in sizable gains. But they have struggled to navigate the bureaucratic thicket to obtain the licenses they need to operate there.

JPMorgan Chase & Co., the largest U.S. bank by assets, is waiting on the Chinese government to grant it some of the licenses it needs to build up its investment banking and wealth-management divisions in China. Visa Inc. and Mastercard Inc., too, need the government's stamp of approval to get their cards more widely accepted in China.

While short on details, the deal broadly requires China to take action on those applications. In some cases, it sets parameters on what the Chinese government can consider in making licensing decisions.

Visa and Mastercard, in particular, stand to gain. Their applications to operate in the country have languished. The deal requires China to make a decision on those applications and to provide a reason if it rejects them.

Mastercard is making "every effort to secure the requisite license to be able to operate in China domestically," a company spokesman said. "This deal is a step forward in the process."

"We see significant potential for Visa to support the continued growth and evolution of digital payments in China," said a spokesman for Visa.

The deal also gives U.S. distressed-debt investors more access to the Chinese market, allowing them to buy troubled loans from China's state-owned banks. That is a business well known to several of Mr. Trump's top advisers on China, including Commerce Secretary Wilbur Ross, who made his fortune investing in troubled companies.

Still, U.S. financial companies face a number of challenges to gaining meaningful market share in China.

China's state-owned banks dwarf U.S. banks in size, and many Chinese consumers pay for goods and services using mobile wallets such as WeChat Pay and Alipay that don't rely on traditional card technology. UnionPay, China's domestic card network, has about 95% of the market for card payments in the country, according to the payments-industry publication Nilson Report.

Even if China grants licenses, more hurdles await. In 2018, American Express Co. became the first U.S. card network to gain approval to set up card-clearing services in China. Its joint venture with a Chinese financial-technology firm is awaiting approval for a business operating license. The People's Bank of China has advised AmEx that it has formally received its application, viewed by AmEx as an important step in the process. The trade deal doesn't impact that.

China already has been taking steps to open up to foreign banks in an effort to expand and reform its own markets. The government, for example, has allowed foreign banks to take control of joint ventures with domestic partners.

"They want JPMorgan to be there to help set transparency and standards and rules," JPMorgan Chief Executive James Dimon told Fox Business in an interview this week. "And the Chinese need, they want to, eliminate corruption, have efficient companies and capital allocation, and they need very good financial markets."

At a press conference announcing the deal Wednesday, President Trump told JPMorgan executives in attendance to say hello to Mr. Dimon for him.

Write to David Benoit at david.benoit@wsj.com and AnnaMaria Andriotis at annamaria.andriotis@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN EXPRESS COMPANY 1.05% 135.87 Delayed Quote.9.14%
BANK OF CHINA LIMITED 0.94% 3.22 End-of-day quote.-3.59%
JPMORGAN CHASE & CO. -0.30% 137.46 Delayed Quote.-1.39%
MASTERCARD 1.52% 340.95 Delayed Quote.14.19%
VISA 1.39% 210.29 Delayed Quote.11.92%
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Financials (USD)
Sales 2020 117 B
EBIT 2020 50 802 M
Net income 2020 33 025 M
Debt 2020 -
Yield 2020 2,73%
P/E ratio 2020 12,7x
P/E ratio 2021 11,9x
Capi. / Sales2020 3,67x
Capi. / Sales2021 3,61x
Capitalization 431 B
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Mean consensus HOLD
Number of Analysts 28
Average target price 140,31  $
Last Close Price 137,46  $
Spread / Highest target 23,7%
Spread / Average Target 2,07%
Spread / Lowest Target -38,2%
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Managers
NameTitle
James Dimon Chairman & Chief Executive Officer
Gordon A. Smith Co-President & Co-Chief Operating Officer
Daniel E. Pinto Co-President & Co-Chief Operating Officer
Jennifer A. Piepszak Chief Financial Officer
Lori A. Beer Chief Information Officer
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