JPMorgan Earnings: Net Interest Income Boom Continues Amid Upbeat 2024 Outlook

Key Morningstar Metrics for JPMorgan Chase

• Fair Value Estimate: $154.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of JPMorgan Chase’s Earnings

JPMorgan Chase JPM reported strong numbers for the fourth quarter, but profitability was adversely affected by an FDIC special assessment charge of $2.9 billion to cover uninsured deposits of certain failed banks during the banking turmoil in early 2023. Excluding this non-recurring charge, the bank reported fourth-quarter adjusted earnings per share of $3.97, higher than the $3.38 FactSet consensus estimate but lower than our $4.18 projection.

While JPMorgan saw higher-than-expected net interest income, or NII, during the quarter, it was more than offset by materially lower principal transactions revenues, contributing to much of the difference from our estimate. The company’s fourth-quarter results (after adjusting for the FDIC charge) resulted in a return on tangible equity of 19%.

There were some positive surprises in management’s outlook for the year ahead. The bank’s full-year NII guidance was materially ahead of our expectations, with JPMorgan believing the bank can continue to earn abnormally high levels of NII for another year. While the bank’s full-year expense guidance was largely in line with our expectations, higher NII should let it earn returns on tangible common equity higher than its through-the-cycle target of 17% in the upcoming year.

Fundamentally, JPMorgan remains arguably the strongest bank under our coverage. That said, we think the market already recognizes this, viewing the name as slightly overvalued, with better bargains available elsewhere. For investors only looking for the lowest-risk option among banks, JPMorgan still fits the bill, but in our view, expected returns reflect this lower-risk profile. We do not plan to materially change our $154 per share fair value estimate as we fully incorporate fourth-quarter results.