Wednesday, October 14, 2020

JPMorgan Delivers, But Macro Factors Loom Large

Once again JPMorgan Chase (JPM) did its part, with a strong performance on the pre-provision line despite ongoing (and unexpectedly high) spread pressure. Unfortunately, macro issues are still significant, with investors worried about a still-fragile recovery, weak commercial borrowing, and election cycle uncertainties.

I continue to believe that JPMorgan shares are undervalued and offer a solid double-digit annualized long-term return. Even if rates never move higher (a highly unlikely event in my view), there’s a good argument for a mid-teens ROTCE that would support a fair value in the range of $110 to $115. With ongoing organic growth opportunities and some eventual uplift from rates, I think the fair value is higher still, and I continue to believe this is a good bank to own through all cycles

 

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JPMorgan Delivers, But Macro Factors Loom Large

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