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Lloyds shares have been a great investment recently. Over the last year, they’ve risen about 90%.
I’ve just bought shares in another bank, however. Because looking ahead, I reckon this one has far more growth potential.
The best bank in the world?
The stock I’ve invested in is JP Morgan (NYSE: JPM). Listed in the US, it’s widely regarded as the best banking institution in the world.
What I like about this business is that it has many ways to win. Unlike Lloyds, which is mainly focused on UK lending, JP Morgan can generate revenues from a range of different areas of banking.
One 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). These could generate substantial income for the banks that facilitate the listings. Add in other M&A activity and AI infrastructure investment and revenues in this area of the financial sector could be prolific.
I also like the company’s prospects in wealth management. Today, JP Morgan manages around $5trn in clients’ capital. With markets near all-time highs, fees here are likely to be immense.
Trading is another area that could do well in 2026. I expect to see plenty of volatility in the equity markets this year – this should create opportunities for the bank as investors reposition their portfolios.
Attractive landscape
Looking beyond all these different revenue drivers, the set-up for US banks looks very attractive as we start 2026.
For starters, the ‘yield curve’ is steepening (short-term interest rates are coming down while long-term rates are staying elevated). This backdrop tends to be very profitable for the banks as they typically operate a ‘borrow short term, lend long term’ model with the costs of borrowing lower.
Secondly, the US economy looks healthy. This year, the International Monetary Fund (IMF) forecasts US GDP growth of 2.6% (versus 1.3% for the UK). This should lead to solid levels of lending (which could pick up as rates fall). It should also lead to low levels of loan defaults.
Third, experts expect to see a wave of deregulation for the banks such as lower capital requirements. This could help them compete more effectively with private credit firms and unlock a whole new source of growth.
It’s worth noting that right now, analysts only expect to see 4% earnings growth from JP Morgan in 2026. But I think that growth estimate is very beatable.
Worth a look in 2026
On the downside, this stock is more expensive than some other banking stocks. Currently, the forward-looking price-to-earnings (P/E) is about 16 (versus 10 for Lloyds).
The dividend yield is also a bit lower than many other banks. For 2026, the yield is only about 2%.
In terms of risks, there are few to consider. But these include CEO Jamie Dimon leaving the company, an unexpected downturn in the US or global economy, adverse interest rate movements, and unexpected announcements from US President Donald Trump (like his recent credit card rate announcement).
Overall though, I see a lot to like here. I think this stock is worth a closer look as we start 2026.
