JPMorgan (NYSE: JPM) is scheduled to report its fiscal Q4 2021 results on Friday, January 14, 2022. We expect JPMorgan to beat the consensus estimates for revenues and earnings. The bank outperformed the expectations in the last quarter, driven by growth in the corporate & investment banking and asset and wealth management businesses. However, the above growth was largely offset by a 3% y-o-y decrease in the consumer & community banking unit – the largest segment by revenue share. We expect the same trend to continue in the fourth quarter.
Our forecast indicates that JPMorgan’s valuation is $172 per share, which is 3% above the current market price of around $167. Our interactive dashboard analysis on JPMorgan’s Earnings Preview has more details.
(1) Revenues expected to edge past the consensus estimates
JPMorgan’s revenues for full-year 2020 were $119.5 billion – up 4% y-o-y, mainly driven by strong growth in the corporate & investment banking segment, partially offset by negative growth in consumer & community banking business.
- The corporate & investment banking segment, which includes sales & trading and investment banking businesses, grew 26% y-o-y in 2020. This was due to higher trading and underwriting deal volumes. While the segment did post a cumulative growth of 6% y-o-y over the first nine months of 2021, it was primarily due to growth in investment banking and equity trading revenues. Notably, the FICC (fixed income, currency, & commodity) trading sub-segment suffered a 20% y-o-y drop over the same period. We expect the same trend to continue in the fourth quarter as well.
- The firm posted a 7% y-o-y drop in the consumer & community segment to around $51.3 billion in 2020. It was because of interest rate headwinds, a decrease in outstanding loan balances, and lower consumer spending levels. As a result, its revenue share decreased from 48% to 43%. While the consumer spending levels have somewhat recovered over the first three quarters of 2021, the lower interest rate environment and stagnant demand for new loans have persisted. Notably, the cumulative nine months revenues were down 2% y-o-y to $37.8 billion. We expect the unit to see some improvement in the fourth quarter, driven by growth in loan balances.
- The asset & wealth management revenues grew 5% y-o-y in 2020. The growth momentum continued in 2021, with nine months’ revenues increasing 20% y-o-y to $12.5 billion. It was because of strong cumulative net fund inflows and higher net investment valuation gains. We expect the fourth-quarter results to be on similar lines.
- Overall, we expect JPMorgan’s revenues to remain around $123.1 billion for the full-year FY2021.
Trefis estimates JPMorgan’s fiscal Q4 2021 revenues to be around $30.69 billion, 3% above the $29.86 billion consensus estimate. We expect the growth in investment banking, equity trading, and asset & wealth management revenues to drive the fourth-quarter results.
The Federal Reserve is likely to introduce multiple interest rate hikes in 2022, improving the net interest spread of banks. JPMorgan’s core-banking revenues are likely to benefit from this move. Further, investment banking and sales & trading are likely to experience higher volumes for some more months, before normalizing with recovery in the economy. Our dashboard on JPMorgan’s revenues offers more details on the company’s operating segments along with our forecast for FY2022.
2) EPS is likely to beat the consensus estimates
JPMorgan’s Q4 2021 adjusted earnings per share (EPS) is expected to be $3.19 per Trefis analysis, almost 6% above the consensus estimate of $3.00. The bank reported a 21% y-o-y fall in the adjusted net income to $27.4 billion in 2020. It was due to a significant increase in the provisions for credit losses from $5.6 billion to $17.5 billion. That said, JPM has reduced its provisions figure in the first three quarters of 2021 to -$8 billion. As a result, the nine months’ cumulative EPS figure improved from $5.10 to $12.05. We expect the fourth-quarter earnings to remain below the year-ago level, as the provisions figure is unlikely to see a substantial decrease in Q4. Overall, JPMorgan is likely to report an adjusted net income of $45 billion and annual EPS of $15.23 for full-year 2021.
(3) Stock price estimate 3% above the current market price
We arrive at JPMorgan’s valuation, using an EPS estimate of around $15.23 and a P/E multiple of just above 11x in fiscal 2021. This translates into a price of $172, which is 3% more than the current market price of close to $167.
Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year
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|S&P 500 Return||-2%||-2%||109%|
|Trefis MS Portfolio Return||-5%||-5%||273%|
 Month-to-date and year-to-date as of 1/11/2022
 Cumulative total returns since the end of 2016