JPMorgan (NYSE:JPM) continues to dominate the financial market, outperforming its largest rivals with its strong asset sensitivity, good funding costs, lucrative non-interest-based business, and competitive lending share. The third quarter earnings report highlighted these strengths, with JPMorgan hitting almost all of the marks that investors wanted.
The net interest income guidance was raised once again, indicating further operating leverage. This leads to an upward revision in estimates for 2023, with the fair value of JPMorgan stock moving up to the low-to-mid-$160s.
Hitting Almost All Of The Targets In Q3’23
JPMorgan had a strong quarter, with revenue rising 20% year over year and 2% quarter over quarter. Net interest income also increased by 30% year over year and 4% quarter over quarter. The company stood out in terms of net interest margin (NIM) leverage, with a 63bp increase year over year and 10bp increase quarter over quarter, while peers experienced a decline. Fee income was mixed, but overall, JPMorgan delivered solid performance.
Good Growth In A Slowing Market
One of the standout achievements for JPMorgan is its ability to generate loan growth. Despite a weakening market for commercial lending, the commercial bank segment saw a 7% year over year and 1% quarter over quarter increase in loan growth. The consumer side also showed positive results, with small business lending stabilizing and growth in home lending, auto lending, and card lending.
JPMorgan’s strong deposit performance should also be noted, although total deposits were slightly down year over year and quarter over quarter, the cost of deposits remains competitive.
An Impressive House In Large Bank Neighborhood
Comparing JPMorgan to its peers, it is evident that the bank is a standout performer. The sequential net interest margin improvement exceeds that of other banks, and the strong skew towards non-interest income helps maintain profitability despite challenging spreads. JPMorgan also demonstrates better performance in terms of costs, profitability, and loan growth compared to its competitors.
The Outlook
JPMorgan raised its net interest income guidance once again, pointing to further operating leverage. Although proposed new capital rules may impact the bank’s return on tangible equity, JPMorgan’s strong performance and growth prospects support a positive outlook. In fact, the stock is currently undervalued and has the potential to rally to the $160-$168 range.
The Bottom Line
While there may be cheaper bank stocks available in the market, JPMorgan’s strong performance, management quality, and overall business quality make it a worthwhile investment. It continues to be a dominant force in the financial market, offering investors a solid risk-adjusted return.
