Technological Investment And Advisory Hiring Will Improve Future Operational Efficiencies

Key Takeaways

• Anticipated loan and deposit growth may enhance net interest income as revolver normalization and consumer deposit trends progress favorably.
  
• Asset management inflows and investment banking momentum, supported by hiring and technology, could increase revenue, efficiencies, and financial performance.
  
• Regulatory and economic uncertainties could pressure revenue growth, profitability, and net income through potential regulatory changes, increased expenses, and rising credit costs.

Catalysts

Operates as a financial services company worldwide.

• The expectation of higher card loan growth in 2025, despite deceleration, suggests potential for higher net interest income (NII) as revolver normalization supports increased card balances and associated revenues.
  
• Stabilization and anticipated growth in firm-wide deposits in the second half of 2025 indicate a potential increase in deposit-related NII, as the firm capitalizes on an expected visible growth trend in consumer checking deposits.
  
• Record-long net inflows in asset and wealth management and continued positive momentum in investment banking, along with high market performance, may drive future revenue and earnings growth through increased management and performance fees.
  
• Continued strategic hiring in banking and advisory roles, alongside technological investment in customer platforms and modernization, supports business growth, potentially increasing revenue and operational efficiencies that may expand net margins.
  
• The firm's ability to deploy its excess capital through share buybacks, while remaining prepared for strategic opportunities, suggests an emphasis on increasing earnings per share and optimizing capital structure amidst strong financial performance.

JPMorgan Chase Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming JPMorgan Chase's revenue will grow by 3.5% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 34.1% today to 29.4% in 3 years time.
• Analysts expect earnings to reach $54.3 billion (and earnings per share of $21.56) by about January 2028, down from $56.9 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $47.5 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 15.0x on those 2028 earnings, up from 13.1x today. This future PE is greater than the current PE for the US Banks industry at 12.3x.
• Analysts expect the number of shares outstanding to decline by 3.44% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.17%, as per the Simply Wall St company report.

JPMorgan Chase Future Earnings Per Share Growth

Risks

• Deposit margin compression and lower deposit balances could continue to put pressure on revenues from Banking & Wealth Management, impacting overall net interest income.
  
• The firm expects net interest income to continue normalizing, driven by rate cuts, which could affect revenue growth and profitability in the near term.
  
• The ongoing and future uncertainty in the regulatory environment could lead to an increase in capital requirements or more stringent regulations, which might constrain earnings growth and return on equity.
  
• Higher expenses driven by compensation and technology growth could pressure net margins and lead to decreased profitability if not offset by higher revenues.
  
• Credit costs could increase if economic conditions worsen, particularly if unemployment rates rise, impacting net income through higher write-offs and increased provisions for credit losses.

Valuation

• The analysts have a consensus price target of $263.5 for JPMorgan Chase based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $330.0, and the most bearish reporting a price target of just $180.51.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $184.8 billion, earnings will come to $54.3 billion, and it would be trading on a PE ratio of 15.0x, assuming you use a discount rate of 7.2%.
• Given the current share price of $267.14, the analyst's price target of $263.5 is 1.4% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.