JPMorgan Chase: Q1 2021 Results In Line With Neutral Thesis

Company Update (JPM US) (Neutral)

Summary

• JPM delivered a set of blow-out results for Q1 2021, but we believe the earnings represent a cyclical peak and have been fully priced in.

• A one-off $5.2bn reserve release was a key contributor; reserves are now only $7bn (3.5% of Tangible Book Value) above the start of 2020.

• Strong revenues were primarily driven by record activity in Corporate & Investment Banking; Net Interest Revenues fell again from Q4.

• JPM's balance sheet is still constrained by regulations, and it had to issue $1.5bn of preferred stock in Q1; only some relief may come in GSIB.

• At $151.21, shares are trading at 2.3x P/TBV, and we expect a long-term ROTCE of 16%, which will limit annualized return to less than 10%.

Introduction

We review JPMorgan Chase's Q1 2021 results released on Wednesday (April 14), having downgraded our rating on JPM stock from Buy to Neutral over the weekend.

We have been a holder of JPMorgan stock since 2008, and have been covering the company on Seeking Alpha since February 2019. We have ha…