JPMorgan Earnings: Strong Results on All Fronts

Key Morningstar Metrics for JPMorgan Chase

• Fair Value Estimate: $178.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of JPMorgan Chase’s Earnings

JPMorgan Chase JPM maintained strong profitability in the third quarter, as net interest income remains solid, investment banking recovers, trading continues to outperform, macroeconomic parameters look robust, and there are indications of loan growth picking up as rates decline. The bank reported earnings of $4.37 per share, 0.9% higher on a year-over-year basis. The third-quarter numbers resulted in a return on tangible equity of 19%, higher than management’s midcycle target of 17%.

We plan on maintaining our fair value estimate of $178 per share as we fully incorporate these results. While JPMorgan is the strongest bank in our coverage in terms of competitive positioning and balance sheet strength, the current valuation remains demanding, and potential investors should wait for a better entry point.

The bank reported NII at $23.4 billion in the quarter, $0.6 billion higher on a sequential and year-over-year basis. The bank slightly improved its 2024 NII guidance to $92.5 billion, which implies an NII of $22.9 billion in the fourth quarter. While the company has not given guidance for 2025, management recently commented that the market’s 2025 NII consensus expectation of around $90 billion is “not very reasonable,” and that it expects the number to be materially lower as short-term interest rates decline. The era of super-strong NII for the bank will come under increased pressure in the interest-rate-cutting cycle, and investors should brace for earnings decline in the medium term.

The headwind to earnings from net interest margin compression can be offset by balance sheet growth, and there were some good signs of this in the third-quarter results, as the loan balances grew by 1.5% on a sequential basis. We expect loan growth to pick up in coming quarters as interest rates decline. The NII story will continue to be the driving force for the bank’s earnings.