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Is JPMorgan the Best Investment Bet Among Big Bank Stocks Right Now?
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JPMorgan (JPM - Free Report) , the nation’s largest bank in terms of total assets and branch network, continues to leverage its scale and market share to garner more business. The company, with a presence in almost all segments of financial services, is a banking behemoth.
JPMorgan has set its sights on global expansion, with plans to grow its presence in Africa and the Asia Pacific regions. Also, in February, the company announced plans to open more than 500 branches and renovate roughly 1,700 locations by 2027. As of June 30, 2024, it had more than 4,800 branches across all 48 states in the United States. In contrast, its peers – Wells Fargo (WFC - Free Report) , Bank of America (BAC - Free Report) and Citigroup (C - Free Report) -- had 4,227, 3,786 and 653 branches, respectively, at the end of the second quarter of 2024.
JPMorgan actively seeks to expand its digital retail bank – Chase – across the European Union countries after launching it in the U.K. in 2021. The company is focused on bolstering its investment banking and asset management businesses in China.
Besides these, JPM is headed by one of the best in the industry, Jamie Dimon. Also, the top management shakeup (announced in January 2024) resulted in the placement of potential successors to Dimon as heads of some important businesses.
JPM Stock Outperforms its Peers
These efforts continue to draw investors’ bullish sentiments toward the JPM stock, the top performer among its peers, BAC, WFC and C, this year. It has also outperformed the industry and the S&P 500 Index.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Additionally, the technical indicators suggest continued strength for JPM. The stock trades above its 50-day and 200-day moving averages, signaling robust upward momentum and price stability.
50-Day & 200-Day Moving Average
Image Source: Zacks Investment Research
This underscores positive market sentiments and confidence in JPMorgan's financial health and prospects.
Other Factors Supporting JPM Stock
Opportunistic Acquisitions: JPMorgan has been growing through on-bolt acquisitions, both domestic and international. In 2023, the company increased its stake in Brazil's C6 Bank to 46% from 40%, formed a strategic alliance with Cleareye.ai (a financial technology firm focused on trade finance) and acquired Aumni.
Also, the company acquired the failed First Republic Bank. The deal continues to immensely benefit JPM’s financials and even helped it reach record profits last year. Additionally, in 2022, it acquired Renovite and a 49% stake in Greece-based Viva Wallet and Global Shares. These deals, along with several others, are expected to support the bank's plan to diversify revenues and expand the fee income product suite and consumer bank digitally.
Revival of Global Deal-Making Activities: JPMorgan continued to rank #1 for global investment banking (IB) fees despite industry-wide weakness in the IB business. Though the company’s total IB fees (in the CIB segment) plunged 59% in 2022 and 5% in 2023, the trend is reversing of late. In the first six months of 2024, the company’s IB fees jumped 35% year over year, with a wallet share of 9.5%. The company is likely to witness growth in IB fees, driven by a healthy IB pipeline and active merger & acquisition market, and leverage its top position to gain further from the changed scenario.
Fortress Balance Sheet and Solid Liquidity: As of June 30, 2024, JPM had a total debt worth $842.2 billion. The company's cash and due from banks and deposits with banks were $530.8 billion on the same date. The company maintains long-term issuer ratings A-/AA-/A1 ratings from Standard and Poor’s, Fitch Ratings and Moody’s Investors Service, respectively.
Hence, JPM continues to reward shareholders handsomely. After it cleared the 2024 stress test, the company increased its quarterly dividend by 8.7% to $1.25 per share earlier this month. In February, the company announced a 9.5% hike in quarterly dividends, which followed a 5% increase last year. In the last five years, it hiked dividends five times, with an annualized growth rate of 5.21%. Currently, the company's payout ratio is 27% of earnings.
Dividend Yield
Image Source: Zacks Investment Research
The company also authorized a new share repurchase program, effective July 1. Management expects the pace of share buybacks to be modest in 2024 after having repurchased shares worth almost $9.9 billion in 2023.
Interest Rate Cuts: A Short-Term Bane for JPMorgan
During the Sept. 17-18 FOMC meeting, the Federal Reserve lowered the interest rate by 50 basis points after more than four years. Now, the Fed fund rates stand in the 4.75-5% range.
The central bank also indicated two more rate cuts this year and four in 2025. This is expected to bring the rates down to 3.4% by the end of next year.
Before the FOMC meeting, JPMorgan’s president and chief operating officer, Daniel Pinto, during the Barclays Global Financial Services Conference on Sept. 10, warned about a potential decrease in net interest income (NII) in 2025 because of rate cuts. Pinto stated that while lower rates would lessen deposit repricing pressure, it also means lower interest income. Nonetheless, he pointed out that long-term NII growth prospects remain intact.
Pinto also noted that non-interest expenses could rise more than expected in 2025. The primary reason for this would be inflation and investments.
As a result, analysts lowered JPMorgan’s earnings estimates for 2024 and 2025.
Estimate Revision Trend
Image Source: Zacks Investment Research
JPM’s Premium Valuation
JPM stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Earnings, JPM is trading at 12.58X, higher than its median of 12.04X and the industry’s 11.54X.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
Parting Thoughts on JPM Stock
JPMorgan’s leadership position in several businesses and strategic plan to expand its footprint domestically and globally gives it an edge over its peers. Though such expansion plans will lead to higher investment-related expenses, it bodes well for the company’s long-term prospects.
Yet, investors must take into consideration JPM stock’s high valuation and bearish analyst stance. Also, investors must check out management comments regarding next year’s NII prospects during the third-quarter 2024 conference call (to be announced on Oct. 11) before making any investment decision.
So, investors should consider these factors carefully and evaluate their risk tolerance before buying the JPM stock. Those who already own the stock can hold on to it because it is less likely to disappoint over the long term.
Image: Bigstock
Is JPMorgan the Best Investment Bet Among Big Bank Stocks Right Now?
JPMorgan (JPM - Free Report) , the nation’s largest bank in terms of total assets and branch network, continues to leverage its scale and market share to garner more business. The company, with a presence in almost all segments of financial services, is a banking behemoth.
JPMorgan has set its sights on global expansion, with plans to grow its presence in Africa and the Asia Pacific regions. Also, in February, the company announced plans to open more than 500 branches and renovate roughly 1,700 locations by 2027. As of June 30, 2024, it had more than 4,800 branches across all 48 states in the United States. In contrast, its peers – Wells Fargo (WFC - Free Report) , Bank of America (BAC - Free Report) and Citigroup (C - Free Report) -- had 4,227, 3,786 and 653 branches, respectively, at the end of the second quarter of 2024.
JPMorgan actively seeks to expand its digital retail bank – Chase – across the European Union countries after launching it in the U.K. in 2021. The company is focused on bolstering its investment banking and asset management businesses in China.
Besides these, JPM is headed by one of the best in the industry, Jamie Dimon. Also, the top management shakeup (announced in January 2024) resulted in the placement of potential successors to Dimon as heads of some important businesses.
JPM Stock Outperforms its Peers
These efforts continue to draw investors’ bullish sentiments toward the JPM stock, the top performer among its peers, BAC, WFC and C, this year. It has also outperformed the industry and the S&P 500 Index.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Additionally, the technical indicators suggest continued strength for JPM. The stock trades above its 50-day and 200-day moving averages, signaling robust upward momentum and price stability.
50-Day & 200-Day Moving Average
Image Source: Zacks Investment Research
This underscores positive market sentiments and confidence in JPMorgan's financial health and prospects.
Other Factors Supporting JPM Stock
Opportunistic Acquisitions: JPMorgan has been growing through on-bolt acquisitions, both domestic and international. In 2023, the company increased its stake in Brazil's C6 Bank to 46% from 40%, formed a strategic alliance with Cleareye.ai (a financial technology firm focused on trade finance) and acquired Aumni.
Also, the company acquired the failed First Republic Bank. The deal continues to immensely benefit JPM’s financials and even helped it reach record profits last year. Additionally, in 2022, it acquired Renovite and a 49% stake in Greece-based Viva Wallet and Global Shares. These deals, along with several others, are expected to support the bank's plan to diversify revenues and expand the fee income product suite and consumer bank digitally.
Revival of Global Deal-Making Activities: JPMorgan continued to rank #1 for global investment banking (IB) fees despite industry-wide weakness in the IB business. Though the company’s total IB fees (in the CIB segment) plunged 59% in 2022 and 5% in 2023, the trend is reversing of late. In the first six months of 2024, the company’s IB fees jumped 35% year over year, with a wallet share of 9.5%. The company is likely to witness growth in IB fees, driven by a healthy IB pipeline and active merger & acquisition market, and leverage its top position to gain further from the changed scenario.
Fortress Balance Sheet and Solid Liquidity: As of June 30, 2024, JPM had a total debt worth $842.2 billion. The company's cash and due from banks and deposits with banks were $530.8 billion on the same date. The company maintains long-term issuer ratings A-/AA-/A1 ratings from Standard and Poor’s, Fitch Ratings and Moody’s Investors Service, respectively.
Hence, JPM continues to reward shareholders handsomely. After it cleared the 2024 stress test, the company increased its quarterly dividend by 8.7% to $1.25 per share earlier this month. In February, the company announced a 9.5% hike in quarterly dividends, which followed a 5% increase last year. In the last five years, it hiked dividends five times, with an annualized growth rate of 5.21%. Currently, the company's payout ratio is 27% of earnings.
Dividend Yield
Image Source: Zacks Investment Research
The company also authorized a new share repurchase program, effective July 1. Management expects the pace of share buybacks to be modest in 2024 after having repurchased shares worth almost $9.9 billion in 2023.
Interest Rate Cuts: A Short-Term Bane for JPMorgan
During the Sept. 17-18 FOMC meeting, the Federal Reserve lowered the interest rate by 50 basis points after more than four years. Now, the Fed fund rates stand in the 4.75-5% range.
The central bank also indicated two more rate cuts this year and four in 2025. This is expected to bring the rates down to 3.4% by the end of next year.
Before the FOMC meeting, JPMorgan’s president and chief operating officer, Daniel Pinto, during the Barclays Global Financial Services Conference on Sept. 10, warned about a potential decrease in net interest income (NII) in 2025 because of rate cuts. Pinto stated that while lower rates would lessen deposit repricing pressure, it also means lower interest income. Nonetheless, he pointed out that long-term NII growth prospects remain intact.
Pinto also noted that non-interest expenses could rise more than expected in 2025. The primary reason for this would be inflation and investments.
As a result, analysts lowered JPMorgan’s earnings estimates for 2024 and 2025.
Estimate Revision Trend
Image Source: Zacks Investment Research
JPM’s Premium Valuation
JPM stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.
In terms of the forward 12-month Price/Earnings, JPM is trading at 12.58X, higher than its median of 12.04X and the industry’s 11.54X.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
Parting Thoughts on JPM Stock
JPMorgan’s leadership position in several businesses and strategic plan to expand its footprint domestically and globally gives it an edge over its peers. Though such expansion plans will lead to higher investment-related expenses, it bodes well for the company’s long-term prospects.
Yet, investors must take into consideration JPM stock’s high valuation and bearish analyst stance. Also, investors must check out management comments regarding next year’s NII prospects during the third-quarter 2024 conference call (to be announced on Oct. 11) before making any investment decision.
So, investors should consider these factors carefully and evaluate their risk tolerance before buying the JPM stock. Those who already own the stock can hold on to it because it is less likely to disappoint over the long term.
JPM currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.