JPMorgan: Upgrade To Buy After 27% Correction & Reassuring Q1 Results

(Preview) Company Update (JPM US) (Upgrade to Buy)

Summary

• We upgrade our rating on JPM to Buy after shares fell 27% from their peak to 1.8x Tangible Book; Q1 2022 results were reassuring.

• Excluding one-off credit reserve builds/releases, profits were stable sequentially and similar to the level in pre-COVID Q1 2020.

• Profits are normalizing after their COVID-year boost, but JPM businesses are otherwise stable, loan growth is accelerating and yields are rising.

• Q1 results support the 16% Return on Tangible Common Equity we assume, which implies a 11.3x P/E. The Dividend Yield is 3.2%.

• With shares at $126.12, we expect an exit price of $198 and a total return of 73% (16.8% annualized) by 2025 year-end. Buy.

Introduction

We are upgrading our rating on JPMorgan Chase & Co. from Hold to Buy, after shares have fallen 27% from their peak, and following a review of Q1 2022 results released on Wednesday (April 13).

We downgraded JPM to Hold in April 2021 on valuation. Before that, JPM was Buy-rated in our coverage from April 2020, and also between Feb…