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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 -- Update

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01/15/2020 | 10:36pm EST

By David Benoit, AnnaMaria Andriotis and Timothy Puko

A trade deal with China has given U.S. banks and financial companies new hope that their decadeslong 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 investors from doing business 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. It 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.

Visa and Mastercard, in particular, stand to gain. Their applications to operate in the country have languished. The agreement requires China to make a decision on their 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.

U.S. credit-card companies have won cases against China before the World Trade Organization, but China's efforts to comply with the rulings resulted in a permitting process nearly two decades long.

U.S. Trade Representative Robert Lighthizer, President Trump's lead negotiator with China, called out the lengthy process in a February report to Congress. He said China's treatment of U.S. credit-card companies was a "conspicuous ongoing example" of its failure to honor WTO obligations in a bid to protect UnionPay, China's domestic card network.

Mr. Lighthizer's comments gave heart to industry lobbyists who had pressed their case for years. But it wasn't until Tuesday that they got word a resolution might be part of the trade agreement.

"We will pop the champagne when a U.S. company -- an electronic payment company's application is approved and they start operation in China," said Scott Talbott, senior vice president of government affairs at the Electronic Transactions Association. "We will cross the finish line at that point."

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 WeChat Pay and Alipay that don't rely on traditional card technology.

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 seeking approval for a business operating license. The People's Bank of China has advised AmEx that it has formally received its application, a move AmEx saw as an important step in the process.

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 them 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, AnnaMaria Andriotis at annamaria.andriotis@wsj.com and Tim Puko at Tim.Puko@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN EXPRESS COMPANY -1.23% 134.9 Delayed Quote.8.36%
BANK OF CHINA LIMITED -0.93% 3.19 End-of-day quote.0.00%
JPMORGAN CHASE & CO. -1.22% 135.81 Delayed Quote.-2.58%
MASTERCARD -1.38% 339.7 Delayed Quote.13.77%
VISA -1.25% 208.81 Delayed Quote.11.13%
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Financials (USD)
Sales 2020 117 B
EBIT 2020 50 800 M
Net income 2020 33 026 M
Debt 2020 -
Yield 2020 2,77%
P/E ratio 2020 12,5x
P/E ratio 2021 11,8x
Capi. / Sales2020 3,63x
Capi. / Sales2021 3,56x
Capitalization 426 B
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Mean consensus HOLD
Number of Analysts 28
Average target price 140,31  $
Last Close Price 135,81  $
Spread / Highest target 25,2%
Spread / Average Target 3,31%
Spread / Lowest Target -37,4%
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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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