JPMorgan Chase: Shares Flat While Earnings Normalize Lower; Reiterate Neutral

(Preview) Company Update (JPM US) (Neutral)

Summary

• JPM has been flat-ish in the 5 months since we downgraded it to Neutral. We believe its 2.3x Price / Tangible Book Value is too high.

• We believe the across-the-cycle average Return on Tangible Common Equity will be 16%, and recent developments are in line with this.

• Profits fell sequentially in Q2. Interest revenues are under pressure, and revenues in the investment bank are falling from their cyclical high.

• Expenses have risen again, and reserve releases are mostly done. JPM's recent expansions into new markets point to excess capital.

• With shares at $157.68, we expect a total return of 22% (6.6% annualized) by 2024 year-end, not attractive enough.

Introduction

We review our Neutral rating on JPMorgan Chase & Co., based on Q2 2021 results, recent management comments and other developments.

We downgraded our rating on JPM in April 2021, having seen the stock gain 74.6% (including dividends) in a year while Buy-rated in our coverage. Since then JPM stock has risen just 1.7%, more than …