JPMorgan enjoys stock bump after investor day reset

JPMorgan Chase & Co.'s investor day case for the huge sums it is plowing back into its businesses and its earnings outlook was well received by analysts and markets.

Concerns over guidance in January that the bank's expenses would jump by about $6 billion this year to $77 billion and put its profitability target at risk, pressured its shares and led to the company temporarily ceding its price to tangible book value premium over big bank rival Bank of America Corp.

But at its May 23 presentations, JPMorgan Chase said it could well meet its goal for a return on tangible common equity of 17% this year. Its credit card net charge-offs are likely to remain subdued into 2023 and its trading revenues are poised to hold closer to heights achieved during the pandemic than previously anticipated. Its shares led a rally in bank stocks for the day, gaining 6.2%, compared with a 4.4% increase for the S&P U.S. BMI Banks Index.

The bank "is executing very well, with share gains across most of its businesses, and updates suggesting [the] growth outlook is still positive even in the context of rising macro concerns," Wolfe Research analyst Steven Chubak said in a note. JPMorgan Chase "should be a clear flight-to-quality beneficiary," Chubak added, though maintaining a "peer perform" rating on the shares, citing their price to tangible book value ratio of about 1.8 and "more favorable risk/reward elsewhere."

Credit Suisse analyst Susan Katzke raised EPS estimates for the bank in 2022-2023, citing its new net interest income guidance, "better near term trading revenue and lower credit costs in 2022," though noting the forecasts rely "on a benign macro environment."

Analysts were also positive on the bank's spending agenda. That includes a $1.2 billion increase in technology investments for 2022 to $6.7 billion, $600 million more for new bankers, advisers and branches, and $800 million more for new and expanded businesses, including its initiative in digital banking overseas. CFO Jeremy Barnum said the bank does not foresee another increase in investment spending in 2023 like the one this year.

BofA Global Research analyst Ebrahim Poonawala said JPMorgan Chase's scale gives it "a huge advantage as the bank goes head-to-head against bank and non-bank competitors across" capital markets, payments, commercial lending, consumer, asset management and international businesses.

"The line of business presentations provided a lot of color on cost components and investments," Jefferies analyst Ken Usdin said. "In a few years' time, we believe [JPMorgan Chase] will be very well-placed versus many other banks that do not have the earnings power to support the same spending levels."