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Lloyds stocks have been a great investment lately. Last year, they increased by almost 90%.
However, I recently bought shares from another bank. Because looking ahead, I think this one has a lot of potential for growth.
The best bank in the world?
The stock I invested in is JP Morgan (NYSE: JPM). Listed in the US, it is widely regarded as the world’s leading banking institution.
What I love about this business is that it has so many ways to win. Unlike Lloyds, which is mainly focused on UK lending, JP Morgan can generate income from different areas of banking.
Another area I’m excited about in 2026 is investment banking. This year is shaping up to be a blockbuster year for IPOs (SpaceX, OpenAI, Anthropic, Databricks, etc). This can generate significant revenue for the banks conducting the listing. Add in some M&A activity and AI infrastructure investment and revenues in this area of the financial sector could grow.
I also like the company’s opportunities in wealth management. Today, JP Morgan manages approximately $5trn in client capital. With markets near all-time highs, the payouts here are likely to be huge.
Trade is another area that could do well in 2026. I expect to see more volatility in the equity markets this year – this should open up opportunities for the bank as investors reposition their portfolios.
An attractive place
Looking beyond all these different revenue drivers, the setup for US banks looks very attractive as we enter 2026.
First, the ‘yield curve’ is steepening (short-term interest rates fall while long-term rates remain high). The latter tend to be more profitable for banks as they often use a ‘short-term, long-term lending’ model with low borrowing costs.
Second, the US economy looks healthy. This year, the International Monetary Fund (IMF) predicts US GDP growth of 2.6% (compared to 1.3% for the UK). This should lead to stronger borrowing levels (which are likely to continue as rates fall). It should also lead to lower loan default rates.
Third, experts expect to see a wave of deregulation of banks as lower capital requirements. This will help them compete effectively with private credit firms and open up a new source of growth.
It’s worth noting that currently, analysts only expect to see 4% earnings growth from JP Morgan in 2026. But I think the growth rate is too high.
It’s worth a look in 2026
On the other hand, this stock is more expensive than other bank stocks. Currently, forward earnings (P/E) ratios are around 16 (compared to 10 for Lloyds).
The dividend yield is also a little lower than most other banks. In 2026, the yield is around 2%.
As for the risks, there are few to consider. But this includes CEO Jamie Dimon leaving the company, an unexpected slowdown in the US or global economy, negative interest rate movements, and unexpected announcements from US President Donald Trump (like his recent credit card rate announcement).
Overall, I see a lot to like here. I think this stock deserves a close look as we head into 2026.
