JPMorgan Investor Day: CEO Dimon Pushes Against More Stock Buybacks at Current Prices

Key Morningstar Metrics for JPMorgan Chase

• Fair Value Estimate: $168.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

JPMorgan Chase’s JPM investor day highlighted the bank’s current competitive strengths, market share gains, and areas for future investment. Our highlight was CEO Jamie Dimon’s statement on additional share buybacks. Analysts repeatedly questioned Dimon, given that the bank is currently sitting on about $54 billion of excess capital. It has enough firepower to substantially increase buybacks even after accounting for management’s discretionary capital buffer, uncertainty in the stress capital buffer, and the most aggressive assumptions on the Basel III endgame proposal. However, Dimon categorically rejected the idea, saying the bank won’t increase buybacks at current prices. He added that “buying back stock as a financial company greatly in excess of 2 times tangible book is a mistake.”

While the analyst community didn’t like this, we think it’s the right call, given the stock’s valuation. We maintain our fair value estimate of $168 per share. Overall, the investor day substantiates our wide moat rating and exemplary capital allocation rating for the bank.

JPMorgan is the most resilient bank franchise under our coverage in terms of balance sheet strength, asset liability management, liquidity, and capital levels. While markets are almost completely sold on the soft landing story for the economy, we think a harder landing is still possible. Management has taken a conservative approach, which we like, and has positioned the bank to weather near-term macroeconomic challenges better than its peers.

Despite this, our thesis remains that the bank is materially over-earning its normalized levels of net interest income because of its asset sensitivity. If anything, management’s comments during the investor day and its unwillingness to deploy more capital into buybacks reinforce our valuation.