Business

JPMorgan Chase & Co. (NYSE:JPM) Vows A Regional Expansion. Does An Acquisition Make Sense?

JPMorgan Chase & Co. (NYSE:JPM) intends to expand its retail banking section into Greater Washington and set up a 70-branch, $4.5 billion lending behemoth in five years’ time.  Some experts however think that this initiative require some acquisition to propel it along.

Bert Ely, a banking expert and consultant says the company will have to undertake the initiative on meaningful scale and make some acquisition so as to do it quickly. He adds that given the size of the company, this could present some challenges.

The bank has set targets that put it on the same level with some of the largest banks in the region. By setting up 70 branches, the bank would tie with United Bank (NASDAQ:UBSI) which also has 70 branches. It would still rank below Capital One Financial Corp. (NYSE:COF), which has 136 branches and M&T Bank (NYSE:MTB), which has 77 locations.  The bank would be above TD Bank, which has 48 branches.

A reliable source close to JPMorgan’s strategy says the bank has got no plans of making an acquisition. According to analysts however, an acquisition could quickly speed up this strategy.

According to Ely, a target for acquisition in the case of JPMorgan is Citigroup Inc (NYSE:C), which has around $8.1 billion in deposits and 34 branches in the D.C area. According to Ely’s argument, Citigroup doesn’t have a robust presence in the Greater Washington for a bank of its caliber. This could offer JPMorgan with a perfect branch network while at the same time growing organically.

Ely says that although Citi has been in D.C for a long time, the bank has done very little over the years. He says JPMorgan could either buy some branches or take over the whole bank. He adds that if they intend to start everything from the scratch, it could take some time.

The M&A strategy being pursued by JPMorgan is not uncommon. Inn 2005, PNC Financial Services Group Inc (NYSE:PNC) entered the Greater Washington market after it acquired the struggling Riggs Bank based in D.C. The bank had 51 braches by the time it was purchased.