JPMorgan Earnings: Outlook Solid as Trading Revenue Holds Up and Loan Growth Accelerates

Key Morningstar Metrics for JPMorgan Chase

• Fair Value Estimate: $235.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

What We Thought of JPMorgan Chase’s Earnings

JPMorgan Chase JPM reported strong second-quarter results. Adjusted earnings came in at $4.96 per share, equating to a return on tangible equity of 20%. We expect earnings to remain elevated in the near term, but we continue to believe the valuations look expensive from a long-term perspective.

Why it matters: Trading revenue remained strong, and investment banking momentum picked up in the latter half of the second quarter as tariff-related concerns eased. The biggest highlight was a marked acceleration in loan growth, especially wholesale loans.

• Overall loans grew by 4% on a sequential basis, powered by credit card loan growth of 4% and wholesale loans growth of 6%. A pickup in wholesale loan growth is welcome news for banks, since the metric has been tepid for the last few quarters.
• Some of the recovery in wholesale loans can be attributed to tariff-related uncertainties in recent months, which may have led to higher utilization of credit lines. We would like to see the recovery here maintained in subsequent quarters.

The bottom line: We plan on maintaining our $235 per share fair value estimate for wide-moat JPMorgan after incorporating these results. We continue to believe the shares are overvalued and there are better options for prospective investors on a risk-adjusted basis.

• The bank has gone from strength to strength in the past decade and has an enviable competitive position. Still, the extent of the market share gains for the bank in the upcoming decade would be materially lower than its performance in the past decade.
• Near-term sentiment remains strong, as trading, investment banking, loan growth, AUM-linked revenue, credit costs, and net interest income growth are all expected to hold up well. The upbeat sentiment has pushed up the bank’s valuation, and the stock is now trading at a cyclically high tangible book value multiple of 2.8 times.