Skip to Content
Stock Analyst Update

Solid Fees Drive Good 2Q Results for JPMorgan

We are increasing our fair value estimate for the wide-moat firm.


Wide-moat JPMorgan (JPM) reported excellent second-quarter earnings, blowing out the FactSet consensus estimate of $3.20 per share with reported EPS of $3.78. This equates to a return on tangible common equity of 23%. Adjusted for the reserve release, ROTCE was 18%. While we had adjusted our estimates to account for larger reserve releases than we previously predicted, the firm's provisioning for credit losses again came in better than expected. The bank released another $3 billion in reserves, on top of the $5.2 billion it released last quarter. With loan-loss reserves at $19.5 billion, putting the loan reserve ratio at roughly 1.9% (excluding the Paycheck Protection Program), the bank still arguably has room for additional reserve releases, although most of the releases should be behind us at this point.

Again, predicting the timing is difficult, and these boosts to earnings are temporary. On a core revenue basis, management had lowered its guidance for full-year net interest income to $52.5 billion from $55 billion. Management also increased its 2021 expense guidance to $71 billion from $70 billion, again driven by higher revenue-related expenses. JPMorgan is in an enviable spot for a bank, getting outsize boosts from investment banking and trading fees, but we think these will fade over time, and pressure will remain on net interest income in this lower rate environment. On the bright side, the continual growth of asset- and wealth-management fees seems sustainable, and card-related volumes and revenue are coming back in a big way.

After adjusting our projections, we are increasing our fair value estimate to $143 per share from $140. Within this we have updated our rate-hike outlook to include increases starting in late 2023, a bit earlier than we had previously expected, and we have also incorporated a corporate tax hike to a statutory rate of 26%.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

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:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

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.