Read us and find out if is still a good idea to buy JPMorgan
JPMorgan Chase is one of the largest global financial services companies, with nearly $3.7 trillion in assets and operations around the globe, as of March 31, 2021.
The Business
Following 3% net revenue growth in 2020, we see flat to 2% growth in 2021, as JPM faces low rates and slow recovery for consumer spending that impacts consumer loan balances and card volume activity. We expect net revenue to improve in the second half of 2021, as loan activity and noninterest income to improve from a weaker first half. In Q1 2021, average deposits were $291 billion, up 54% Y/Y as client balances remain elevated. In Q1 2021, net revenue rose 14% Y/Y in Q1 2021, driven by higher noninterest income (+40%) with strong contributions from investment banking (+46%), FICC trading (+15%), and equity trading (+47%), while net interest income (-11%). Return on tangible common equity (ROTCE) was 23%. We think it will be difficult to post another stellar quarter like Q1 2021, but JPM is well positioned for U.S. economic recovery. Net interest income, 40% of total net revenue, declined 11% in Q1 2021, as the interest rate spread declined 53 bps to 1.64% year-over-year. Total allowance for credit losses was reduced by $5.2 billion to $26.5 billion with more confidence that credit risk exposure will lower than when provision for loan losses were booked during last year’s pandemic.
As of December 31, 2020, JPM's tangible book value per share was $66.11, up 8.4% from a year ago, and its Basel III common equity Tier I capital was $205 billion with a 13.1% ratio. In 2019, JPM provision for credit losses was $5.6 billion, an increase of $714 million from the prior year. The new accounting for the current expected credit losses had no impact on 2019 financial results, and JPM realized $4.3 billion capital impact in 2020. It impacted common equity Tier I capital ratio by 4 basis points. Return on tangible common equity was 24% in Q4 2020 compared to 17% a year ago.
Investment Case
We see JPM as the best managed large diversified bank, and it is poised to benefit from higher consumer and commercial loan activity. We see large opportunity with V-shaped U.S. economy, healthy rebound of the consumer, and strength in capital markets. We believe JPM has a global opportunity with Top-3 ranking in equity/fixed income underwriting and trading. JPM is only big four bank that has materially grown net interest income in last five years. In the second half of 2021, loan growth is expected to grow from one of the lowest ratios of total net loans to total deposits versus peers. Risks to our rating are recession, reduced loan activity, and low rates.
Our 12-month target of $138, is equivalent to P/E of 11.75x our 2022 earnings estimate. JPM continues to trade at a premium to peers on a P/TBV of 2.2x vs. the 1.4x peer average.
Our risk assessment is Low. Reflects our view of the company's strong balance sheet, diversified lines of business, and strong capital ratios. JPM's geographic and product diversity provide significant protection from a local or regional downturn.
Are you looking to invest in Stocks by 2021 and beat JPMorgan with the highest possible return?
+Portfolio of the US STOCKS with the greatest potential to rise in the USA.
+Active portfolio risk management to avoid moments of high volatility in the market such as during the month of March 2020 and then quickly it was reinvested 100% after this moment.
+All portfolio movements will be alerted when they are made.
+This strategy accumulates a profitability greater than 80.00% measured in US Dollars in 2020.
+Our 12 .500% Return Quant Algo since 2006 for your Trading Strategy.
Satisfaction guarantee
Try it in this link:
Comments