Key Stats for JPMorgan Chase & Co.
aside: stockAday's been AWOL for 2 months. :( Apologies. The joys of running a startup. We'll get to a few old requests first, and then start asking for requests
Has old man Morgan run out of steam? 100 days into the Trump Runup and let's access the future for $JPM.
| Ticker | JPM |
|---|---|
| Sector | Banks |
| Latest price | $87.00 |
| Value | $309,094M |
| Daily vol | $1,373M |
| Date | 04 May 2017 |
Useful Links
- Latest news from Yahoo Finance
- Latest results from SEC Edgar
- Website: jpmorganchase.com
Description
JPMorgan Chase & Co. is a financial holding company. The Company is engaged in investment banking, financial services. It operates in four segments
- The Consumer & Community Banking segment offers services to consumers and businesses through bank branches, automatic teller machines (ATMs), online, mobile and telephone banking.
- The Corporate & Investment Bank segment, comprising Banking and Markets & Investor Services, offers investment banking, market-making, prime brokerage, and treasury and securities products and services to corporations, investors, financial institutions, and government and municipal entities.
- The Commercial Banking segment provides financial solutions, including lending, treasury services, investment banking and asset management.
- The Asset Management segment comprises investment and wealth management.
How big are these different divisions?
| Companies | Net Revenue | Net Income | Return on Equity |
|---|---|---|---|
| Consumer & Community | $45bn | $10bn | 18% |
| Corporate & IB | $35bn | $11bn | 16% |
| Commercial | $7bn | $3bn | 16% |
| Asset Management | $12bn | $2bn | 24% |
| Total (inc. Corp & Adjustments) | $96bn | $25bn | 10% |
Gawd, I hate looking at banks... how does a business with 4 operating divisions having returns of 16% to 24% end up with a 10% return after corporate and adjustments?
Recent financials
On a 5 year view, little has changed at the topline and from a return on equity perspective. With a good buyback program the EPS has ticked up nicely.
| Metric | 2016A | 2015A | 2014A | 2013A | 2012A |
|---|---|---|---|---|---|
| Revenue | $96bn | $94bn | $95bn | $97bn | $98bn |
| EPS | $6.19 | $6.00 | $5.29 | $4.34 | $5.19 |
| RoE | 10% | 11% | 10% | 9% | 11% |
But as you'd expect, banks everywhere in the world are being forced to have more capital and less leverage. So there's like improvement in the return on assets, as capital ratios tick higher.
| Metric | 2016A | 2015A | 2014A | 2013A | 2012A |
|---|---|---|---|---|---|
| Return on Assets | 1.00% | 0.99% | 0.89% | 0.75% | 0.94% |
| Total capital ratio | 15.5% | 15.1% | 13.1% | 14.3% | 15.2% |
Competition
Unsurprisingly the competition is everyone, according to their 10-K / annual report.
Competitors include other banks, brokerage firms, investment banking companies, merchant banks, hedge funds, commodity trading companies, private equity firms, insurance companies, mutual fund companies, investment managers, credit card companies, mortgage banking companies, trust companies, securities processing companies, automobile financing companies, leasing companies, e-commerce and other Internet-based companies, financial technology companies, and other companies engaged in providing similar products and services.
And they think it can only get worse:
It is likely that competition in the financial services industry will become even more intense as the Firm’s businesses continue to compete with other financial institutions that may have a stronger local presence in certain geographies or that operate under different rules and regulatory regimes than the Firm, or with companies that provide new or innovative products or services that the Firm does not provide.
If we look at a few banking ratios, specifically returns, old man Morgan ain't the worst the investment bankers, Citi and BAC get that prize. But the competitors who are lite on investment banking are substantially better, i.e. WFC and USB.
| Companies | Total Capital Ratio | Return of Assets | Return on Equity |
|---|---|---|---|
| JPMorgan Chase & Co. | 15.5% | 1.00% | 10% |
| Bank of America Corp | 14.3% | 0.82% | 7% |
| Citigroup Inc | 16.2% | 0.82% | 7% |
| Goldman Sachs Group Inc | 17.8% | 0.8% | 9% |
| Morgan Stanley | 22.0% | 0.7% | 8% |
| U.S. Bancorp | 13.2% | 1.34% | 13% |
| Wells Fargo & Co | 16.0% | 1.16% | 14% |
Wall Street thinks?
So, what do the brokers, who don't work at JPM think of them? Well, these navel gazing professionals on Wall Street have a $93.24 target for JPM and their recommendation to clients is Buy. That's despite a pedestrian upside of 7% to their target.
Valuation
With a forecast 6% yield and a generous buyback program, it's hard to worry about them. And the valuations via PE ratio look bunched.
| View Peers | Valuation | Forecast PE | Long-term Growth | Dividend Yield | FCF Yield |
|---|---|---|---|---|---|
| JPM | $309,094M | 13x | 6% | 2% | 6% |
| BAC | $236,557M | 13x | 9% | 2% | 4% |
| C | $166,556M | 12x | 6% | 1% | 4% |
| GS | $90,024M | 12x | 12% | 1% | 0% |
| MS | $80,541M | 13x | 12% | 2% | 2% |
| USB | $88,403M | 15x | 5% | 2% | 7% |
| WFC | $274,462M | 13x | 8% | 3% | 5% |
But let's raise two flags
- JPM has traded between 9x and 15x earnings
- Today's market value of $309bn is substantially higher than pre-crisis high of $180bn, when the stock price hit $53. i.e. substantially lower than today's price
I just don't get why any financial institution today is worth more that at the top of 2007/2008, when it was the go-go years of finance!
Dividends
JPMorgan Chase & Co. is forecast to pay a dividend of $2.08 per share, compared with a historic dividend of $1.90 per share. That is a 9% growth.
The forecast dividend of $2.08 compares to a forecast EPS of $6.70. i.e. leaving plenty of room for buyback.
Catalysts
In the last 3 months the stock price has moved by 3% that compares with a change in the earnings forecasts of 2%. i.e. the recent 1Q results have left the stock price and fundamentals flat. That's despite the 6th earnings beat in 6 quarters!
To me it keeps like the Trump Runup, with the idea of a looser regulatory straight-jacket is already in the price. Plus the Fed's outlook on increasing rates is also well know. The net effect is that JPM looks like it can add $0.80 to $1.00 to earnings each year. Which clearly benefits the stock.
So, to me it's a solid, quality stock, but hard to see any catalyst that will propel the valuation higher.
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Disclosure: I have no position in any of the stocks mentioned. However I may initiate a position within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Reddit, moderators, and the author do not advise making investment decisions based on discussion in these posts. Analysis is not subject to validation and users take action at their own risk.
Author notes: u/shane_stockflare works at a financial website, Stockflare, and is a Chartered Financial Analyst.
Submitted May 04, 2017 at 10:07AM by shane_stockflare http://ift.tt/2pL5sLP
