JP Morgan Chase & Co.

JPM Details

JPMorgan Chase & Co. (NYSE: JPM) is a financial services firm with operations globally. It is engaged in providing services in investment banking as well as financial services and commercial banking. The company also deals in financial transaction processing along with asset management.

Result Performance for Q2FY21 (For the Quarter Ended 30 June 2021)

• The total net revenue stood at $30,479 million in Q2FY21, down 8% YoY, whereby non-interest revenue declined by 8% YoY to $17,738 million in Q2FY21 owing to lower CIB Markets revenue
• The CET1 capital stood at $209,010 million with the Standardized and Advanced CET1 ratios at 13.0% and 13.8%, respectively
• The Reported Net income improved significantly to $11,948 million in Q2FY21 from $4,687 million in Q2FY20
• The average loans remained flat at $1.0 trillion in Q2FY21 compared to the prior year, the average deposits increased by 23% YoY to $2.3 trillion

Key Data (Source: Company Reports)

Key Updates

• The board of directors of the company, on 21 September 2021, have announced a Q2FY21 dividend of $1.00 per share on its common stock compared to the Q1FY21 dividend of $0.90 per share. The dividend will be paid on 31 October 2021 to its stockholders.
• As per the release dated 21 September 2021, the company stated that it has acquired Frank, the fastest-growing college financial planning platform, to strengthen millions of students and their families to navigate their financial requirements to college and beyond.

Key Risks

The company is exposed to the risk of adverse economic conditions triggered by the COVID-19 pandemic. Further continuation of the pandemic and its adverse economic repercussions could substantially hurt its businesses as well as results and financial condition. It is also prone to increase governmental as well as regulatory scrutiny.

Outlook

The company continues to invest as well as innovate and undertake strategic and add-on acquisitions to drive growth. The management has guided to achieve the net interest income of around $52.5 billion in FY21, on a managed basis and it estimates the adjusted expense to remain around $71 billion, market dependent. Further, the management estimates the net charge-off rate in the card in FY21 to be lower than 2.5%.

Valuation Methodology: Price/Book Value Based Relative Valuation (Illustrative)

Stock Recommendation

The stock has been valued using P/BV multiple-based illustrative relative valuation and the target price so arrived reflects a fall of low double-digit (in % terms). A slight discount has been applied to P/BV Multiple (NTM) (Peer Average), considering the decline in net interest margin as well as flat average loans in Q2FY21. Further, its non-performing loans stood at 1.08% in Q2FY21 compared to Industry Median at 0.91%.

Considering the aforesaid facts and risks associated, we suggest investors to liquidate the stock.

Hence, we give a “Sell” recommendation on the stock at the current market price of $167.28 per share (Time: 12:37 PM, NY, USA) on 27^th September 2021.  

Daily Technical Chart

Source: REFINITIV, Note: The purple color line represents RSI (14-Period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

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