JPMorgan Chase 4Q21 Earnings Analysis


JPM Stock Analysis

Business Description:


JPM Stock Analysis

  • Massive increase in deposits YoY mostly from Increase in Federal Reserve System balance sheet

  • Increase in net income from release of reserves for credit losses of $1.8 billion in 4Q21

JPM Stock Analysis

Catalysts:


  • Economic recovery in the US and around the World

  • Rising interest rates


Risks:

  • Zero interest rates, QE and banking regulations (Dodd-Frank Act of 2011) makes makes it harder for banks to do business

  • Increased investments of $15 billion in 2022


Financial Analysis:

JPM Stock Analysis

Valuations

  • My personal Biases

  • 5.2% of my portfolio, buying since 2016

  • Likes management


  • Assumptions

  • Net income of $36.0 Billion for FY22 without release of credit losses and with increased investments

  • Net income falls increasing by 4% annually

  • Discount Rate of 10% for the next 5 years

  • Terminal Growth rate of 2%


JPM Stock Analysis

  • Exit Multiples Analysis

  • Based on Tangible Book value in 2026

  • 2% annual increase in book value for base case (2.3% in last 5 years)

  • 2.3% for bull case and 1.8% for bear case

  • 4% of tangible book value paid in dividends every year (average for last 5 years)

  • 15% of shares outstanding bought back over next 5 years in base case, 20% in bull case and 10% in bear case

  • Price to Tangible book value per share ranged from 1.2 to 2.3 in last 5 years, currently at 2.3, expected to rise if interest rates rises


JPM Stock Analysis

JPM Stock Analysis

Conclusion

  • Stock undervalued but future returns not expected to be much at current price

  • Good hedge against rising interest rates

  • Good stock to hold long-term


JPM Stock Analysis

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