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 …