JPMorgan Stock Topped The Consensus In Q2

-4.36%
Downside
200
Market
191
Trefis
JPM: JP Morgan Chase logo
JPM
JP Morgan Chase

JPMorgan’s stock (NYSE: JPM) has gained 16% YTD, as compared to the 18% rise in the S&P500 over the same period. Further, the stock is currently trading at $156 per share, which is 8% below its fair value of $169 – Trefis’ estimate for JPMorgan’s valuationThe bank surpassed the street estimates in the second quarter of 2023. It reported net revenues of $41.3 billion – up 34% y-o-y, primarily driven by a 36% increase in consumer & community banking (CCB), a 48% jump in commercial banking, and a 13% rise in the asset & wealth management segment. This was partly due to organic growth and partly because of the acquisition of the First Republic Bank in May. Overall, the net interest income increased 44% y-o-y, followed by a 25% growth in non-interest revenues. On the flip side, the provisions for credit losses witnessed an unfavorable increase in the quarter from $1.1 billion to $2.9 billion. However, it was somewhat offset by a drop in noninterest expenses as a % of revenues. Altogether, the net income increased 67% y-o-y to $14.47 billion.

The company recently announced that it has successfully completed the Federal Reserve’s 2023 Comprehensive Capital Analysis and Review (“CCAR”) stress test process. Further, it intends to increase the quarterly common stock dividend from $1.00 per share to $1.05 per share (subject to approval by the board). Notably, the CCAR exercise is conducted every year by the Fed to analyze the strength of the country’s largest financial institutions under conditions simulating economic downturn (similar to 2008).

The bank posted total revenues of $79.66 billion in the first half of FY 2023 – up 30% y-o-y. It was mainly due to a 44% y-o-y increase in the NII and a 25% rise in the noninterest revenues. Further, non-interest expenses as a % of revenues decreased over the same period. That said, the positive impact was somewhat offset by higher provisions for credit losses. All in all, it resulted in a 60% y-o-y jump in the net income to $27.09 billion. Moving forward, we estimate JPMorgan’s revenues to touch $157.06 billion in FY2023. In addition, JPM’s adjusted net income margin is likely to see a slight improvement in the year, resulting in an adjusted net income of $45.45 billion and an annual EPS of $15.63. This coupled with a P/E multiple of just above 11x indicates a valuation of $169.

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What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

 Returns Jul 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 JPM Return 7% 16% 114%
 S&P 500 Return 2% 18% 103%
 Trefis Multi-Strategy Portfolio 6% 26% 305%

[1] Month-to-date and year-to-date as of 7/24/2023
[2] Cumulative total returns since the end of 2016

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