JPMorgan Chase & Co. (JPM)

Equity
US
Financial Services

RISK

RETURN

Key risk factors

Strong trading liquidity

Low default risk

Low price volatility

Key return factors

Good growth

Decent dividends

Somewhat favourable analyst view

Company profileJPMorgan Chase & Co. operates as a financial services company worldwide. It operates through four segments: Consumer & Community Banking (CCB), Corporate & Investment Bank (CIB), Commercial Banking (CB), and Asset & Wealth Management (AWM). The CCB segment offers s deposit, investment and lending products, payments, and services to consumers; lending, deposit, and cash management and payment solutions to small businesses; mortgage origination and servicing activities; residential mortgages and home equity loans; and credit card, auto loan, and leasing services. The CIB segment provides investment banking products and services, including corporate strategy and structure advisory, and equity and debt markets capital-raising services, as well as loan origination and syndication; payments and cross-border financing; and cash and derivative instruments, risk management solutions, prime brokerage, and research. This segment also offers securities services, including custody, fund accounting and administration, and securities lending products for asset managers, insurance companies, and public and private investment funds. The CB segment provides financial solutions, including lending, payments, investment banking, and asset management to small business, large and midsized companies, local governments, and nonprofit clients; and commercial real estate banking services to investors, developers, and owners of multifamily, office, retail, industrial, and affordable housing properties. The AWM segment offers multi-asset investment management solutions in equities, fixed income, alternatives, and money market funds to institutional clients and retail investors; and retirement products and services, brokerage, custody, trusts and estates, loans, mortgages, deposits, and investment management products. The company also provides ATM, online and mobile, and telephone banking services. JPMorgan Chase & Co. was founded in 1799 and is headquartered in New York, New York.

Valuation: Slightly overvalued

Multiple

TTM

NTM

P/E

11.50

12.10

PEG

1.50

P/B

1.70

1.50

P/CR

4.40

P/RIBPT

14.80

P/IBPT

10.60

Considering past and projected metrics, the stock is moderately 'expensive' compared to its peers. In particular, the stock is reasonably priced on P/E, Editor's note: P/CR is Price to Core Revenue (CR), similar to P/S for corporates. CR = Net interest income + Net fee & commission income. P/IBPT is Price to Income Before Provisioning and Taxes (IBPT), similar to EV/EBITDA for corporates. IBPT = Core revenue -- Operating expenses + Non-recurring income. P/RIBPT is Price to Recurring Income Before Provisioning and Taxes (RIBPT), similar to P/FCF for corporates. RIBPT = Core revenue -- Operating expenses.

Performance: Mixed

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 18ppts over past six months and grown 2ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

Analyst view: Somewhat favourable

The average target price is 218 and suggests 11% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 230.0. This translates into 17% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 157.7. This is equivalent to 20% downside potential in the worst case.

Profitability: Average

RoE

JPMorgan Chase & Co. reported a return on equity (RoE) of 15.0% in the last 12 months, down from 15.7% in FY23. The market consensus projects a RoE of 14.0% in FY24, again ahead of the peers.

RoA

Another important profitability metric, return on assets (RoA), amounted to 1.3% in the last 12 months, a decrease from 1.3% in FY23. The market analysts predict that RoA will be 1.2% in FY24, again weaker than the peers.

C/I

In the last 12 months, the cost-to-income ratio (C/I) declined to 66.8%, above the peers. The consensus estimate for FY24 for CI is 53.6%, again above of the peers.

Growth: Good

EPS

Core revenue

IBPT

RIBPT

JPM reported revenue of USD 128 178mn in the last 12 months, up 3% from FY23. The institution earned USD 73 854 mn of interest before provisioning and taxes (IBPT) in the trailing 12 months (TTM), growth of 3% from FY23 At the same time, the dynamics of a more stable income, as measured by recurring income before provisioning and taxes (RIBPT), were drastically different. EPS grew 3% from FY23 to USD 16.74. Market expects EPS to reach USD 16.63 in FY24.The core revenue growth has been moderate in the last several years (positive-to-neutral), while IBPT growth has been steady. This all contributed to continued EPS growth (positive-to-neutral). The RIBPT trend is rapidly growing, a notch better than that of IBPT. We emphasize the highly volatile dynamics of all key metrics. This is a extremely negative factor.

Dividends: Decent

Dividend paid

Dividend yield

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been moderate and on par with its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream.

Default risk: Low

The solvency (credit quality) of JPM is high. The credit profile rests on (a) a moderate capital position, (b) sufficient asset quality, (с) a very strong corporate governance framework, (d) moderate earnings power and cost efficiency, and (e) its good liquidity profile.

Volatility: Low

In normal market circumstances, JPM is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to minimal. Finally, it may be affected by inherently volatile sector.

Stress-test: Modest

In highly turbulent market conditions, JPM is as volatile as an index. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. At the same time, due to inherently volatile sector, its maximum losses could be limited.

Selling difficulty: Very low

JPM boasts very high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains mildly favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.

Country risk: Very low

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

Other risks: Negligible

No other major risks have been identified.