JP Morgan Chase has been demonstrating strong financial performance as it keeps growing asset. What’s more, a solid dividend and a fresh $30 billion share buyback program offer a combined capital return approach to shareholder value.
These factors have contributed to the stock’s excellent (and S&P-beating) return of 64.8% over the last year alone.
Despite those gains, the shares trade at a moderate 12.4 times the company’s forward earnings forecast.
JP MORGAN CHASE & CO. (New York symbol JPM; www.jpmorganchase.com) is the largest banking firm in the U.S., with total assets of $4.21 trillion as of September 30, 2024.
JP Morgan recently passed the U.S. Federal Reserve’s latest annual stress test, which measures how financial firms would cope with a jump in unemployment, falling stock prices and other unfavourable developments.
However, Morgan noted that the Fed’s calculation overestimated a certain measure of part of its income. That would modestly increase its losses under the test.
Even so, that adjustment is unlikely to impact Morgan’s ability to pay dividends and buy back shares.
For 2024, the bank expects that its net interest income (interest income from loans less payments to depositors) will rise to about $91 billion from $89.3 billion in 2023.
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However, as it seems likely the U.S. Federal Reserve will continue to cut lending rates in the next few months, Morgan’s net interest income in 2025 will probably fall short of the $89.5 billion consensus forecast.
At the same time, the bank expects rising costs for labour and new investments in its businesses, including opening 500 new branches by 2027, will increase its expenses in 2025 above the $94 billion estimate.
Dividend Stocks: Steady results should continue for JP Morgan Chase even with some rate cuts
In the third quarter of 2024, Morgan’s loan-loss provisions jumped 124.8%, to $3.11 billion from $1.38 billion a year earlier. That’s mainly because consumers continue to deplete the savings they built up during the pandemic.
The higher provisions cut earnings by 1.9%, to $12.90 billion from $13.15 billion. Morgan spent $6.0 billion on share buybacks in the quarter, which is why per-share earnings improved 0.9%, to $4.37 from $4.33. Revenue rose 7.0%, to $42.65 billion from $39.87 billion, mainly due to higher investment banking and underwriting fee income.
The bank remains well capitalized. It ended the third quarter with a CET1 ratio of 15.3%. (CET1, or Common Equity Tier 1, measures a bank’s ability to keep extending credit to individuals and businesses.) That’s well above the U.S. Federal Reserve’s recent requirement that it maintain a minimum level of 12.3%.
Morgan’s earnings will probably rise 11% to $18.10 a share, and the stock trades at a moderate 12.4 times that forecast. The bank also raised your quarterly dividend by 8.7%, to $1.25 a share from $1.15, in the third quarter of 2024. The new annual rate of $5.00 yields 2.2%. Moreover, Morgan has authorized a new $30 billion share repurchase plan.
Recommendation in Wall Street Stock Forecaster: JP Morgan Chase & Co. is a buy.
