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Category: Stock Market and JP Morgan Chase (JPM)
Date: 17 January 2021 Stock Price of JP Morgan (JPM): $138.64 We take a look at the 4th quarter earnings report of their 2020 fiscal year of JP Morgan Chase on of the oldest financial institutions in the world. Revenues for the quarter was pegged $29.2 billion, up 3% compared to the same quarter of last year and net income for the quarter came in at $12.1 billion, up 42% on the same quarter of the previous year.
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JPMorgan Chase reported strong results in the fourth quarter of 2020, concluding a challenging year where we generated record revenue, benefiting from our diversified business model and dedicated employees. While we reported record profits of $12.1 billion, we do not consider the reserve takedown of $2.9 billion to represent core or recurring profits- Jamie Dimon, Chairman and CEO"
About JP Morgan Chase
JPMorgan Chase (NYSE: JPM) is one of the oldest financial institutions in the United States. With a history dating back over 200 years, here's where we stand today:
- We are a leading global financial services firm with assets of $2.6 trillion.
- We have a presence in over 100 markets.
- We have over 250,000 employees.
- We serve millions of consumers, small businesses and many of the world's most prominent corporate, institutional and government clients.
- We are a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing and asset management.
- Our stock is a component of the Dow Jones Industrial Average.
Overview of JP Morgan Chase's 4th quarter 2020 earnings report
Data below refers to the latest quarter's data unless specified otherwise:
- Revenue: $29.22 billion (up from $28.2 billion for the same period of the previous year)
- Revenues increased by 3% over the last 12 months
- Total non interest expenses: $16.048 billion (down from $16.29 billion for the same period of the previous year)
- Total non interest expenses decreased by 2% over the last 12 months
- Some margin gain for JP Morgan as their revenues increased a lot more than their non interest expenses
- Net income: $12.13 billion (up from $8.52 billion for the same period of the previous year)
- Net income decreased by 42% over the last 12 months
- Diluted earnings per share: $3.79 (up from $2.57 for the same period of the previous year)
- PE ratio of JP Morgan Chase: 13.7
- Dividend declared: $0.90
- Dividend yield: 2.6%
- Diluted weighted-average shares outstanding: 3.085 billion (down from 3.148 billion for the same period of the previous year)
- Book value per share: $81.75 (up 8% from $75.98 for the same period of the previous year)
- Cash and cash equivalents: $24.87 billion
- Cash and cash equivalents per share: $8.06
- Cash and cash equivalents makes up 5.8% of JP Morgan Chase's market capital
- Cash and cash equivalents makes up 074% of JP Morgan Chase's total assets
- Loans net of allowances for losses: $984.5 billion
- Loans net of allowances for losses 29.1% of JP Morgan Chase's total assets
- Goodwill: $53.4 billion
- Goodwill makes up 1.57% of JP Morgan Chase's total assets
- Goodwill per stock: $17.30
- Stockholders equity in JP Morgan Chase: $279.4 billion
- Stockholders equity per share: $90.56
- So JP Morgan Chase is trading a 1.53 times its stockholders equity which is outside the expected range of between 2 and 5 which most firms tend to trade at.
- For perspective, the S&P 500 has a price to book ratio of 3.9
JP Morgan Chase's management commentary on their 4th quarter 2020 earnings
Jamie Dimon, Chairman and CEO, commented on the financial results: “JPMorgan Chase reported strong results in the fourth quarter of 2020, concluding a challenging year where we generated record revenue, benefiting from our diversified business model and dedicated employees. While we reported record profits of $12.1 billion, we do not consider the reserve takedown of $2.9 billion to represent core or recurring profits – essentially reserve calculations, while done extremely diligently and carefully, now involve multiple, multi-year hypothetical probability-adjusted scenarios, which may or may not occur and which can be expected to introduce quarterly volatility in our reserves. While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over $30 billion continue to reflect significant near-term economic uncertainty and will allow us to withstand an economic environment far worse than the current base forecasts by most economists.”
Dimon added: “In Consumer & Community Banking, deposits grew 30% or over $200 billion driven primarily by growth in the Federal Reserve’s balance sheet and the continuation of modest market share gains. Within our consumer lending franchise, auto and retail mortgage originations were both up more than 20%. Consumer spending continued to recover, as reflected in combined debit and credit card spend being up for the full quarter. The Corporate & Investment Bank delivered another impressive quarter with growth in Global Investment Banking fees of 34% and Markets revenue of 20%. With a record quarter, Commercial Banking earned $3.3 billion of investment banking revenue in 2020, surpassing its previous $3 billion long-term target. In Asset & Wealth Management, AUM grew 17% due to higher asset values and net inflows of over $190 billion into long-term and liquidity products over the last twelve months.”
Dimon added: “In Consumer & Community Banking, deposits grew 30% or over $200 billion driven primarily by growth in the Federal Reserve’s balance sheet and the continuation of modest market share gains. Within our consumer lending franchise, auto and retail mortgage originations were both up more than 20%. Consumer spending continued to recover, as reflected in combined debit and credit card spend being up for the full quarter. The Corporate & Investment Bank delivered another impressive quarter with growth in Global Investment Banking fees of 34% and Markets revenue of 20%. With a record quarter, Commercial Banking earned $3.3 billion of investment banking revenue in 2020, surpassing its previous $3 billion long-term target. In Asset & Wealth Management, AUM grew 17% due to higher asset values and net inflows of over $190 billion into long-term and liquidity products over the last twelve months.”
Dimon concluded: “We ended the year with a CET1 ratio of 13.1% (vs. 12.4% at the beginning of the year) and capital above $200 billion, providing us with meaningful capacity to further invest in our business and communities, while returning capital to our shareholders. This increase in capital was after raising over $2 trillion of credit and capital for our consumer and institutional clients around the world, which includes nonprofits and U.S. government entities, including states, municipalities, hospitals and universities and adding net $12 billion to credit reserves. We also hold $1.4 trillion of cash and marketable securities, which is currently over $450 billion in excess of what is required. We opened branches in new markets, improved our digital capabilities, and made acquisitions that will enhance our product offerings and deepen our engagement with our customers. We also continued to invest in our communities – for example, through our initial commitments to support those most impacted by the pandemic and our longer-term commitment to advance racial equality and promote economic growth. Our earnings power and healthy capital position also provide us the flexibility to pay dividends and return excess capital to shareholders through share repurchases. I want to end by thanking our frontline colleagues and those working from home who quickly adapted to the pandemic and safely helped our clients, customers, communities and governments.”
JP Morgan Chase (NYSE: JPM) stock chart over the last 5 years
The image below shows the stock price history of JP Morgan (JPM) over the last 5 years. And its been a good time for JPMorgan stockholders with the stock increasing by 159.9% over the last 5 years. No investor would say no to those kind of returns.
The stock of JPMorgan Chase is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of JPMorgan's stock is positive at this point in time.
The stock of JPMorgan Chase is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of JPMorgan's stock is positive at this point in time.
JP Morgan Chase (JPM) stock vs Citigroup (C) vs BlackRock (BLK) stock over the last 5 years
The image below shows the stock price performance of BlackRock, Citigroup and JPMorgan Chase over the last 5 years. While all three are very large financial services providers their stock price trends and returns over the last 5 years are very different. The summary below shows the stock price returns provided by the three companies over the last 5 years:
- JPMorgan Chase: 159.9%
- BlackRock: 147.9%
- Citigroup: 87..9%
JP Morgan Chase (JPM) latest stock valuation
So what is JP Morgan Chase stock worth based on the release of their latest earnings report? Based on JP Morgan Chase latest earnings report our valuation models provide a target price (full value price) for JP Morgan Chase stock at $135.90 a stock (up slightly from our 3rd quarter 2020 earnings report valuation of JP Morgan Chase). We therefore believe that the stock of JP Morgan Chase is fully valued at its current price of around $138.60
We usually suggest that long term and fundamental investors get in at least 10% below our target price (full value price) which in this case is $135.90 Therefore we believe a good entry point into JP Morgan Chase's stock is at $122.300 or below.
We expect the stock of JP Morgan Chase to trade around its current price in coming weeks and months as we believe it is fully priced at this point in time.
We usually suggest that long term and fundamental investors get in at least 10% below our target price (full value price) which in this case is $135.90 Therefore we believe a good entry point into JP Morgan Chase's stock is at $122.300 or below.
We expect the stock of JP Morgan Chase to trade around its current price in coming weeks and months as we believe it is fully priced at this point in time.
Next earnings release date for JP Morgan Chase (JPM)
It is expected that JP Morgan Chase (JPM) 1st quarter 2021 earnings report will be released in the middle of April 2021