On Tuesday, Barclays (LON:BARC) reaffirmed its positive stance on JPMorgan Chase & Co. (NYSE:JPM), maintaining an Overweight rating and a price target of $217.00. The bank's third quarter of 2024 is showing promising signs, with investment banking fees expected to rise by approximately 15% year-over-year, propelled by robust Debt Capital Markets (DCM) activity.
JPMorgan forecasts that volumes in institutional loans and leveraged loans will nearly double compared to the same period last year. Equity Capital Markets (ECM) activity remains strong, while mergers and acquisitions (M&A) are anticipated to stay relatively stable.
JPMorgan has projected its third-quarter trading revenue for 2024 to be flat or possibly increase by up to 2%, citing strength in equities, especially derivatives, which is expected to balance out weaker Fixed Income, Currencies, and Commodities (FICC) trading, particularly in rates. The bank also reiterated its Net Interest Income (NII) expectation of around $91 billion for 2024, while suggesting that the consensus NII forecast of $90 billion for 2025 might be overly optimistic due to lower rate projections and asset sensitivity.
The financial institution has also maintained its 2024 expense guidance, excluding firmwide legal expenses, at approximately $92 billion. This includes additional costs from the Federal Deposit Insurance Corporation (FDIC) special assessment in the first quarter of 2024 and a Foundation contribution in the second quarter.
However, JPMorgan anticipates that the consensus expense estimate of about $93.7 billion for 2025 may fall short, expecting actual expenses to be higher due to new investments in areas such as artificial intelligence, data centers, and application refactoring.
For credit card net charge-off (NCO) rates, JPMorgan continues to expect a rate of around 3.40% for 2024, with a slight increase to approximately 3.60% for 2025. Despite potential medium-term increases in delinquencies, the bank remains within its underwriting expectations. Observations on the U.S. economy indicate that consumption is still present, with non-discretionary spending growing, albeit at a slower rate. JPMorgan notes that while excess savings from the Covid period are largely depleted, the cash buffer remains above historical averages due to wages rising faster than inflation.
JPMorgan is confident in its ability to deliver a return on tangible common equity (ROTCE) of 17% over the cycle, although it acknowledges that reaching this target in 2025 could be more challenging. The bank also foresees a modest pace of buybacks due to uncertainties surrounding Basel III finalization (B3E) regulations.
JPMorgan has evolved its corporate structure with the creation of the Commercial & Investment Bank (CIB), which amalgamates major wholesale businesses to form a larger platform aimed at increasing market share and serving a broader client base. In its consumer business, JPMorgan is targeting a 15% share of total U.S. deposits over time, up from its current share of approximately 11.5%, and aims to increase its card market share to 20% from the current 17%, through expansion and investment in areas like travel and connected commerce.
In other recent news, JPMorgan has been the subject of recent analyst evaluations and regulatory investigations. Financial firm Piper Sandler has maintained its Overweight rating on JPMorgan shares, citing the bank's strong position amid challenges faced by competitors. The firm also expects investors to closely follow management's remarks on consumer health and other key business dynamics during JPMorgan's mid-quarter update.
Conversely, Deutsche Bank (ETR:DBKGn) has downgraded JPMorgan's stock from Buy to Hold, attributing this change to the bank's year-to-date performance and limited potential for further upside. Both firms have maintained their respective price targets.
In regulatory news, the Consumer Financial Protection Bureau (CFPB) is investigating JPMorgan and other major U.S. banks regarding the handling of customer funds on the Zelle Network (LON:NETW). In response to the CFPB's inquiries, JPMorgan is considering legal action against the bureau.
Major brokerages, including JPMorgan, are anticipating a Federal Reserve rate cut in September following a rise in the U.S. unemployment rate.
InvestingPro Insights
As JPMorgan Chase & Co. (NYSE:JPM) continues to navigate the financial landscape, InvestingPro data and tips offer additional context for investors. The bank's market capitalization stands strong at $616.86 billion, showcasing its significant presence in the industry. A notable InvestingPro Tip is that JPMorgan has raised its dividend for 13 consecutive years, reflecting a commitment to shareholder returns and financial stability. This is complemented by the bank's low price-to-earnings (P/E) ratio of 11.26, which, when adjusted for the last twelve months as of Q2 2024, is even lower at 10.48, suggesting that the stock may be undervalued relative to its near-term earnings growth.
Furthermore, the bank's revenue growth has been impressive, with a 19.08% increase over the last twelve months as of Q2 2024, and an even more substantial quarterly revenue growth of 31.75% in Q2 2024. These metrics, combined with a solid dividend yield of 2.12%, make JPMorgan an attractive prospect for those looking for both growth and income. For investors seeking a deeper dive into JPMorgan's performance and potential, there are additional InvestingPro Tips available, providing a comprehensive analysis of the bank's financial health and market position.
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