Higher Valuations, Lower Risk for 2 Big Banks
We think JPMorgan and Wells Fargo are worth more with less uncertainty now.
After updating our projections and accounting for the time value of money, we’ve raised our JPMorgan Chase (JPM) fair value estimate to $136 per share from $112 and our Wells Fargo (WFC) fair value estimate to $52 per share from $45. We also lowered our fair value uncertainty rating for both banks to medium from high, as economic uncertainty from the pandemic has declined. Even with the valuation increase, JPMorgan still trades above what we think it’s worth. Wells Fargo, on the other hand, appears uniquely undervalued in our U.S. banking coverage.
JPMorgan Chase is arguably the most dominant bank in the United States. With leading investment bank, commercial bank, credit card, retail bank, and asset- and wealth-management franchises, it is a force to be reckoned with. The bank's combination of scale, diversification, and sound risk management seems like a simple path to competitive advantage, but few others have been able to execute a similar strategy. Even the best-managed banks are not immune to the occasional stumble, but JPMorgan has seemingly managed to put all the pieces together in a more cohesive and less error-prone way than peers. With the importance of scale only increasing, we think it will be hard for competitors to catch up.
Eric Compton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.