JPMorgan

JPMorgan Chase reported decent third-quarter results, with net revenue up 8.0% and diluted earnings per share up 9.9% from a year ago. The shares were flat in Oct. 13 trading as investors weighed softer capital markets activity against an improved net interest income outlook.

Why it matters: The scorching-hot start for capital markets in 2026 lost a bit of steam during the third quarter, though we believe the tailwind of a more constructive near-term rate environment more than offsets some normalization in markets revenue. After the Federal Reserve raised the federal-funds rate by 25 basis points to a targeted range of 3.75%-4.0%, we were pleased by JPMorgan's revised guidance, as anticipated net interest income is now in line with our full-year 2026 forecast without an increase in card net charge-offs. Markets revenue of $10.3 billion represented a 15% improvement from a year ago but a 15% contraction from the prior quarter. We believe equities growth, again up 49% from a year ago, will prove to be unmaintainable and we forecast a harsh correction in 2028.

The bottom line: After digesting these results, we are raising our fair value estimate for wide-moat JPMorgan Chase to $330 per share from $326, as robust lending demand and continued strength in deposit-gathering look keen to benefit from a higher rate environment. We view the shares as fairly valued. Our downward revisions in near-term trading revenue for the well-diversified behemoth are more than offset by higher near-term yields and stronger loan growth across the consumer and commercial banking franchises, calling for net interest income to grow by double digits again in 2027. While we believe trading revenue should not structurally outgrow the economy ad infinitum and view a pronounced contraction as inevitable over the medium term, our lowered near-term forecasts still imply fourth-quarter 2026 and full-year 2027 growth of 13.0% and 6.8%, respectively.

Investors seem to focus on expense guidance with JPMorgan Chase, perhaps because there's been little else to critique in recent years. After the company raised full-year 2026 expense guidance to $108.6 billion, from $107.5 billion as of the prior quarter, analysts asked for stronger evidence of the return it's generated on its artificial intelligence spending. Management said that currently represents a drop in the bucket at roughly $700 million, in a 2026 technology budget of $19.8 billion, as last reported during its 2026 investor day. We believe the firm's willingness to regularly reinvest in the business should provide long-term investors with increased comfort, as it indicates the firm's position as an industry leader across nearly every business line it competes in has not hampered continued growth aspirations. Further, the firm's record in generating strong returns on its reinvestment is well demonstrated by the 680-basis-point improvement in its efficiency ratio from 2022 to 2025.

Considering that the US banking landscape remains fairly fragmented, particularly in comparison with other developed nations, we believe that JPMorgan's capability to amortize the largest technology budget in banking over massive consumer and commercial franchises underpins its most durable competitive advantage, allowing it to remain a chief beneficiary in an industry that we believe should continually consolidate.

We are raising our fair value estimate to $330 per share from $326. Our fair value estimate translates to a price/earnings multiple of 13.6 times and 13.0 times our forecasts for 2026 and 2027, respectively. It also translates to 3.1 times our forecast 2026 tangible book value.

Consistent with other major financial institutions across our coverage, the primary drivers of JPMorgan's valuation remain asset growth, the trajectory of its net interest margin, and the continued expansion of the firm's core fee-earning businesses, particularly in wealth management, global banking, and trading.

Looking at the long-term drivers behind our annualized fee-income growth forecast of 6.0% over the decade ahead, we see a stronger runway for revenue generation in the AWM segment. We forecast net new asset flows to modestly compress from 6.5% in the trailing decade to 5.9% during the upcoming decade, a still-healthy clip reflecting the strong reputation of its private bank, command over distribution channels, and the retail wealth management pipeline. Further, the asset management division wields wide product access across alternative and multi-asset products, enabling the firm to weather the trends of fee compression. In our view, these dynamics combine to enable durable revenue growth on an asset base we forecast to compound at 10.6% annually over the decade to come.

We anticipate that investment banking revenue should compound at a 3.3% annual rate over the upcoming decade, even from currently elevated levels, as the franchise modestly improves its market share across the gamut of advisory, equity capital markets, and debt capital markets verticals. While JPMorgan has the largest collective market share in investment banking, we believe that gradually increasing consolidation should bode well for firms that possess unique reputational strength and deep networks of corporate client relationships for consistent deal flow.

The one fee income line where we remain a bit more skeptical than others, over the long term, is institutional trading. While our near-term estimates reflect a continuation of the buoyant environment, we still struggle to see why trading revenue should structurally outpace the broader economy over the cycle. As a result, we expect roughly 2.2% average annual trading revenue growth over the decade to come, implying a pronounced normalization from recently elevated growth rates.

We view JPMorgan's fortress approach as effective in helping navigate challenging macroeconomic environments. We expect net interest income growth of 11.3% in 2026 and 12.7% in 2027, riding the tailwinds of elevated rates in the near term. We also forecast 2.2% growth in 2028, despite a rate-cutting cycle we pencil to occur then, as the firm navigates the headwinds of lower yields by earning asset growth. Updated risk weightings from the Basel III Endgame reproposal, particularly in residential real estate, will enable JPMorgan to support its lending portfolio with slightly less CET1 capital, improving the return profile.

Expenses have been another vital point of interest with JPMorgan, as the market regularly scoffs at the size of its technology budget until it becomes enamored with operating efficiency improvements. Despite headlines, we believe the ability and willingness of JPMorgan to continually boast the largest noninterest expense budget in banking underpins its ability to stave off competition and improve its profitability, culminating in expenses that compound at 4.9% over the next decade and roughly 80 basis points of improvement in its industry-leading efficiency ratio, despite operating with a significantly higher mix of investment banking and wealth management than peers.

We assign JPMorgan a Wide Morningstar Economic Moat Rating based on durable cost advantages and switching costs across its consumer, commercial, and investment banking franchises. An average return on tangible common equity of 17.1% over the past decade, comfortably above our estimated 9.4% cost of equity, corroborates our view, despite a decadelong headwind from historically low rates and long stretches of a flat to inverted yield curve. We forecast ROTCE improving to 21.3% over the next decade as branch expansion lifts low-cost deposit share and rising product density deepens existing relationships.

JPMorgan exercises its cost advantage by pulling the operating efficiency lever rather than the funding cost lever. Despite deposit betas and overall funding costs roughly in line with peers through the last rate-hiking and rate-cutting cycle, the firm fractionalizes its industry-leading $19.8 billion annual technology budget across roughly 87 million consumers and over 100,000 commercial clients globally, enabling an efficiency ratio that vastly exceeds our banking coverage. Further, fee-based businesses like wealth and asset management and investment banking also require less capital than spread-based net interest income, and cross-selling into them via commercial and retail relationships lowers customer acquisition costs, enabling the strongest preprovision net revenue/risk-weighted assets ratio in our banking coverage.

The consumer and community banking segment builds primary relationships more on service quality—fraud prevention, app functionality, branch/ATM proximity—than on yield. Roughly 80% of consumer clients use JPMorgan as their primary bank, with retention exceeding 95% among that group. This implies a customer life exceeding 20 years, well above the roughly 14-year industrywide average implied by the 7% of US banking customers who switch primary providers annually. Cross-selling is improving, with 28% of CCB clients holding at least two products, up from 24% in 2019. Branch density compounds these dynamics: JPMorgan's $504 million in deposits per branch is third-best in our coverage and roughly 82% above the average, driving the segment to the best consolidated efficiency ratio in our coverage at 52.4% and average segment returns on tangible common equity of 15.2% over the past decade.

The asset and wealth management segment represents the most underappreciated aspect of the consolidated enterprise, in our view. The asset management business ranks among the largest global players, with $4.8 trillion in AUM diversified across fixed income, equity, liquidity, multi-asset, and alternatives. Despite the industrywide shift toward passive products, JPMorgan has stayed true to active management and still generated net new asset flows averaging 6.3% annually over the trailing 13 years, including a remarkable 4.1% annualized growth rate in equities, aided by an asset mix with over 70% of client assets in fixed income, liquidity, multi-asset, and alternatives. The extended wealth management franchise, spanning CCB-branded advisory and J.P. Morgan Private Bank in a roughly 30/70 split, holds over $4.5 trillion in client assets, which have grown nearly sixfold since 2014 on the back of 8.2% annualized net new flows in custody and brokerage accounts over the trailing decade, aided by relationship pricing that rewards clients for consolidating balances across the ecosystem. Wealth management carries structural, dual-sided switching costs: Advisors are reluctant to move because roughly 19% of client assets don't follow them to a new firm (per Cerulli Associates), while clients build deep, trust-based relationships with advisors who guide them through major life events and craft personalized plans that make performance difficult to benchmark. These capital-light franchises have generated a 16.1% ROTCE over the trailing decade.

The commercial and investment bank combines payments, commercial banking, institutional trading, and investment banking under one roof, generating a 19.4% ROTCE over the past decade, including its proportionate share of the corporate/treasury segment. The payments business alone processes over $10 trillion in average daily volume, roughly double its closest global competitor, and JPMorgan's position as the largest clearer of US dollars, largest merchant acquirer, and largest credit card issuer lets it operate an open-loop network intermediated through Visa and Mastercard while capturing economics that approach a closed-loop system by serving as issuing bank, acquiring bank, and processor simultaneously—a structural cost advantage competitors cannot replicate. Commercial banking switching costs mirror the pattern across our coverage: Middle-market clients face workflow lock-in from proprietary portals or data feeds embedded in treasury operations and loss of a data-backed credit history if they leave, while large corporates face data degradation from bank-specific reconciliation nomenclature and lose the benefits of multicurrency notional pooling and intraday sweeping that only a single-bank ecosystem can provide. Institutional trading, the largest such desk globally at an estimated 11.8% market share, is not moatworthy on its own, given post-Dodd-Frank capital requirements, but it underpins investment-banking distribution and reinforces client monetization across the segment.

Taken together, we view JPMorgan as a wide-moat franchise with durable cost advantages in the CCB and CIB segments and switching costs spanning all three segments, forming an ecosystem whose intersegmental synergies—from cross-sold products to a fractionalized technology stack—make the whole greater than the sum of its parts.

JPMorgan Chase could white-label its infrastructure to small and midsize banks, such as a licensing fee to run digital payments on its Kinexys rail, generating further revenue diversification with margins resembling those for software as a service.

A structural shift in the macroeconomic environment may lead to a prolonged, steeper yield curve, providing a tailwind to net interest income.

Increased incorporation of agentic artificial intelligence in the trading operation may enable significant increases in the execution of trading volume at a similar headcount.

CEO Jamie Dimon’s eventual succession remains one of the largest keyman risks in the financial sector. Any sign of a leadership vacuum or a shift away from his fortress philosophy could lead to a significant valuation derating.

As the G20-backed Project Agorá (unified ledger) scales, the correspondent banking system could become commoditized and threaten high-margin payment volume.

The proliferation of financial technology platforms that pay higher yields on deposits could bring up funding costs for all banks.