JPMorgan Earnings: Net Interest Income, Expenses, and Guidance Improve

Key Morningstar Metrics for JPMorgan Chase

• Fair Value Estimate: $153.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of JPMorgan Chase’s Earnings

JPMorgan JPM reported yet another strong quarter, with earnings per share of $4.33, beating the FactSet consensus of $3.95. The result was primarily attributable to stronger net interest income, or NII, and lower expenses than expected. The bank also improved its full-year guidance. If banking is supposed to be under more pressure these days, somebody forgot to tell JPMorgan.

As we update our projections, we expect a mix of effects to roughly counteract each other. Rising short-term NII expectations and slight increases to our longer-term NII outlook will be balanced by an expectation for increased capital requirements and another year of decent expense growth in 2024. As such, we do not expect a material change to our current $153.00 fair value estimate.

While JPMorgan arguably remains the strongest bank under our coverage, we think the market already recognizes this, and view the name as fully valued, with better bargains elsewhere. For investors only looking for the lowest-risk option among banks, JPMorgan still fits the bill, but in our view, expected returns reflect the lower-risk profile.

JPMorgan reiterated its through-the-cycle return target on tangible common equity at 17%, despite expecting a 25% capital increase from the Basel III Endgame proposal. While there is still uncertainty around how the rules will be finalized—and we believe the bank will act to optimize its business in response to these changes—we still think there is a chance this target may have to come down eventually. For now, with returns on tangible equity of over 20% turning into a routine occurrence, that eventuality may still be a long way off.