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JPMorgan Chase reported strong second-quarter 2026 earnings results on July 14, sending shares up a low-single-digit percentage on the back of managed net revenue growth and ex-notables earnings per share growth of 14.8% and 23.7%, respectively, from a year ago. 

Why it matters: While ebullient capital markets have been a rising tide lifting all ships, the bank's eye-popping investment banking and equity capital markets results appeared to surpass the sky-high expectations investors priced into shares over the quarter, complementing strong card services results. With investment banking and equity markets revenue up 45% and 86%, respectively, we now believe the super-cycles propelling each to be more immense and persistent than initially pegged, yet we still tread cautiously toward extrapolation of these cyclical business results too far into the future. The largest card issuer in the US furthered its dominance by growing credit and debit volume faster than peers at 10%, off a larger base, while simultaneously improving credit metrics led full-year net charge-off guidance to improve by 20 basis points to 3.2%.

The bottom line: We are raising our fair value estimate for the wide-moat firm to $320 from $311 after digesting these robust results as we raise near-term trading and investment banking forecasts and longer-term card and asset management growth. We view shares as fairly valued. Due to the undeniable prevalence of the broader enterprise, we believe the strength of the asset and wealth management segment is oftentimes overlooked, and we are slightly raising our forecast net asset inflows to capture the continued execution of this franchise. With the Apple Card portfolio transfer not occurring until at least late 2027, we believe the organic momentum in the card services business is indicative of a flywheel in which better customer breadth improves reward offerings and underwriting capability, increasing long-run potential.

By leaning into its ethos and highlighting macroeconomic risks that the firm is inexorably exposed to in the press release and earnings call while simultaneously raising full-year guidance for net interest income beyond the year-to-date beat and an improved card net charge-off ratio, we can't help but highlight that the current backdrop could not be much more conducive for the banking giants.

With trading revenue continually setting record highs, we identify the ultimate drivers to be elevated activity associated with trading news flow surrounding technological uncertainty regarding the build-out and proliferation of artificial intelligence into the broader economy on top of macroeconomic uncertainty arising from geopolitical conflict and stubborn inflation, with record high asset levels to magnify the volume. While we see no fundamental reason why the collective profit pool of trading volume should structurally outgrow the economy ad-infinitum, we also struggle to see a near-term catalyst to abate the activity as even negative developments would prompt portfolio repositioning. That said, with heightened leverage levels being a material contributor to trading activity, we highlight that this is a fundamentally cyclical business and that leverage cuts both ways, implying some level of normalization is inevitable in the long run, even if not immediate, and it is likely to be sharp.

We also believe that the investment banking super-cycle set in motion by a more constructive regulatory backdrop for mergers and acquisitions and a fertile IPO market highlighted by SpaceX, the largest IPO in history where JPMorgan Chase served as one of the five senior bookrunners, still appears to have some legs in the rally with Anthropic and OpenAI presumably gearing up to go public in the not too distant future having already submitted confidential S-1 filings. Similar to trading, we believe that investment banking revenue is quite volatile and should likely decline from the current levels that have only been surpassed by the storied 2021 market, though we do not necessarily think a material contraction will happen until 2028 or thereafter.

On top of more constructive near-term views for the more cyclical revenue sources, JPMorgan Chase continues to thrive in its more resilient, through-the-cycle business lines. The asset and wealth management business has generated annualized positive net inflows of 8.4% since 2019, vastly surpassing the wirehouse firms and holding its own in an environment where the registered investment advisor and independent channels have particularly thrived. While we believe this trend is likely to persist due to the economic incentives for advisors with a client book above a certain asset threshold, we believe that JPMorgan Chase has largely navigated the asset flow headwinds that similarly structured wealth management shops have faced by owning distribution of particularly high-quality, actively managed funds, leading us to forecast more resilience than for the wirehouses in the aggregate.

We are raising our fair value estimate for JPMorgan to $326 per share, from $320, due to a revised interest rate forecast. We are now expecting a 0.25% increase in the federal-funds rate in December 2026, on top of the 0.25% hike in September 2026, with our revised forecasts calling for short-term interest rate cuts in the second half of 2027 and an unchanged long-term forecast.

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 within wealth management, global banking, and trading. Ultimately, our revised fair value estimate equates to 3.1 times the bank's projected 2026 tangible book value.

Looking at the long-term drivers behind our annualized fee-income growth forecast of 6.4% 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 down to 5.7% 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.

Further, 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 4.2% average annual trading revenue growth over the decade to come, implying a pronounced normalization from recently elevated growth rates.

Turning to the balance sheet, we view JPMorgan's fortress approach as effective in helping navigate challenging macroeconomic environments. We expect net interest income growth of 11.7% in 2026 and 9.2% in 2027, as headwinds from a rate-cutting cycle we forecast to resume in late 2027 should be more than offset by earning asset growth. Further, updated risk weights from the Basel III Endgame reproposal, particularly within residential real estate, will enable JPMorgan to support its lending portfolio with slightly less CET1 capital, improving the return profile.

Finally, 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 5.0% over the next decade and roughly 90 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 Morningstar Economic Moat Rating of wide, based on durable cost advantages and switching costs across its consumer, commercial, and investment banking franchises. Average returns on tangible common equity, or ROTCE, of 17.1% over the past decade, comfortably above our estimated 9.4% cost of equity, corroborate our view despite a decade-long headwind from historically low rates and long stretches of a flat-to-inverted yield curve. We forecast ROTCE improving to 21.0% 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 per risk-weighted asset 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, and JPMorgan has proven highly adept at winning them: roughly 80% of consumer clients use JPMorgan as their primary bank, with retention exceeding 95% among that group, implying 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 JP 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 (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 stand-alone 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 midsized banks, such as a licensing fee to run digital payments on its Kinexys rail, generating further revenue diversification with SaaS-like margins.

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 AI in the trading operation may enable significant increases in the execution of trading volume at a similar headcount.

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 (the Unified Ledger) scales, the correspondent banking system could become commoditized and threaten high-margin payment volume.

Increased proliferation of fintech platforms that pay higher yields on deposits could bring up funding costs for all banks.