저자: 진행자 · 외국인
요약 보기
JPM 4분기 실적은 매출 437억달러(+13.4%)로 시장 예상을 상회했고 순이익은 전년比 55%↑. 신용카드 상각률은 1% 미만으로 소비자 신용은 양호. 다만 주가는 장부가(TBV) 대비 2.5배로 과열, 향후 매출 성장 둔화 전망. 특별배당은 없고 자사주 매입과 배당 확대 기조 유지. 지금은 적극 매수 구간이 아니며 조정 시 재진입을 고려하라는 입장.
다듬은 글
over the past year shares of JP Morgan are up 50%. That performance beats companies like Apple, Amazon, Microsoft, and Google. That is what has me so excited to be talking about stocks like JPM. I feel like sometimes the market somewhat ignores this. Now, full disclosure: I've been invested in JP Morgan for a while, and we'll have to have discussions on today's show.
Is the valuation at JP Morgan getting a little stretched? When we look at tangible book value, we'll look at that from a historical perspective. We'll also have to look at this one technically. It certainly looks stretched. Can you take profits on JPM? Are there areas where, if this stock were to pull back, you can step in? We'll discuss that in the context of the company announcing its Q4 earnings. Of course, we'll go through the earnings.
Whether or not you're interested in JP Morgan really makes no difference. This is a company you should pay attention to, because basically every company and every consumer you know has an account or a touchpoint with JPM, whether it's a credit card, a home loan, or a checking account. This company touches it all. So we'll get a look into the consumer, and also the business side, since they have a big banking business on the commercial side. We'll look at all of those things as they relate to JPM, see how things are going, and see some of the reasons why. Again, over the past year shares are up over 50%.
The company has certainly benefited from the tailwinds of higher interest rates, and that has helped its net interest income. We'll look at that in a moment. But revenue is looking absolutely spectacular: $43.74 billion, that's 13.4% growth year over year. This is why you can't ignore certain stocks. That growth rate, off the top of my head, is beating Apple, beating Amazon, beating Microsoft, beating Google, and in a lot of cases beating a lot of stocks. This company also beat expectations by over $2 billion. The company is just flying high on all cylinders.
Now, it's expected to cool off in the coming quarters, maybe single-digit growth, maybe even some negative revenue growth. That's what we'll talk about when we discuss how overextended this stock is, both from a technical standpoint and a valuation standpoint.
One number we're looking at, and this is kind of a bird's-eye view: everybody expects the consumer and the U.S. economy to eventually fall off a cliff based on the inflation rate and all those types of things. One way to look at it, number one, is employment. If the unemployment rate meaningfully ticks up, we're all screwed as investors. The market will have a dramatic drop. We've seen that before during the Great Financial Crisis and at other times. That is a fact. Right now we're not seeing it.
The other thing we're not seeing, at least on credit cards, is this: yes, we've seen revolving balances continue to tick up, but charge-offs continue to hold steady. What we do with charge-offs on the credit card side is compare them to pre-pandemic levels. Obviously the government made it rain during the pandemic, with PPP loans and all that stuff splashing down on the economy, so naturally credit card defaults started to go lower, including a lot of revolving balances. So we pull a number from December 2019, before the world fell apart, when it comes to government spending, stimulus, and the pandemic. I said "stimuluses." I don't even think that's a word. But we had a 1.13% charge-off rate in December 2019. Right now the charge-off rate is still below 1%. In fact, it's down below 0.9%. Delinquency rates on their credit cards are at about 84% to 87% of pre-pandemic levels. The company is probably doing a better job from a risk management perspective, but again, we're just seeing consumers not default and not charge off on these credit cards, and that's obviously a good sign for the economy.
Now, not so good over at JP Morgan is the valuation. You have this outperformance. It's outperforming tech companies, its revenue growth is outperforming many, many sectors, and so the valuation at JP Morgan has ballooned. One valuation metric you can look at for banks is tangible book value per share. Companies tend to give you this inside their quarterly financials, and there are ways to calculate it on the financial sites as well. What I like to do is take tangible book value from a company and compare it to itself over time. In this case, JP Morgan is way overextended. We're trading at two and a half times, even more than that, to tangible book. That means the tangible book value at JP Morgan is $97.30 per share, and shares are currently trading at over $250. That's over 2.5 times tangible book. If you were to liquidate JP Morgan right now and get rid of all the assets, the company would only have $97 per share. As an investor, you're paying $252. So you have to look forward. There are reasons to pay a premium. Number one is the revenue growth rate going forward. Number two is some of the trends we see on the credit card side. But more or less, you're paying for forward revenues to keep churning out.
Obviously JP Morgan is a well-run bank, and it deserves to trade at a premium. You've seen over the past several years it usually trades at 1.5 times, maybe two times, tangible book. So it's certainly overextended there, and it mirrors what we're seeing on the stock chart as well.
From a financial perspective, there's a reason you're trading at over two and a half times book. Net income ballooned to over $14 billion in the most recent period. That's not only up 9% from the previous quarter, folks, it was up 55% year over year. That income came on revenues about 11% higher. What the company did very well was control non-interest expenses. Notice those actually went down 7% year over year. Higher revenue on lower expenses at JPM is driving these massive profits.
When we look at the different segments, the picture is somewhat different between consumer and business. On the consumer side, things are pretty good. Net revenue was basically flat year over year, at about $18.4 billion once you factor in all the costs. What I thought was interesting is that banking and wealth management actually went down, and we'll talk about some of the things JP Morgan said on the conference call about growing its wealth management business in a moment. But I was surprised home lending was up 12%. I know home prices continue to rise, and interest rates really haven't dropped at all, which is driving some of this. But it's interesting that people are still stepping out and doing those home loans. Card services and auto loans were also up 14% year over year. So people continue to be employed, and as long as they're employed, they're going to feel comfortable making home payments, servicing credit card debt, and buying a new car when they feel like it. As long as unemployment stays where it is, this stock will probably keep doing well.
Non-interest expenses are basically all your employee expenses. An interesting aspect here is the provision for credit losses. The company is setting aside these provisions in case some consumers decide not to pay their loans. The more JP Morgan sets aside, the more it makes us, as investors who like to analyze these things and connect the dots, think they're worried about the future. That was up 20% year over year, though down about 6% quarter over quarter, from $2.8 billion to $2.6 billion. It's elevated over the last year but more or less steady, which is also a good thing.
When you come over to the commercial banking side, revenues were up big, 18%. What was interesting, different from the consumer side, is that we see very few provisions for credit losses. So business looks very healthy, at least for the clients JP Morgan is dealing with. Net income for that segment was up 59%, from $4.2 billion to $6.6 billion. That's just for commercial and investment banking, not the whole company.
One thing they pointed out on the conference call, and somebody asked a really good question about it, is where the growth opportunities for JP Morgan are. As we look at revenue estimates, they're starting to flatten out in future quarters. One thing they pointed to is M&A. The M&A market is spurring some activity, possibly due to slightly less regulation under the Trump administration and more companies buying other companies, which could generate revenue.
Now, asset and wealth management is something the company pointed to on the call as an area where it needs to do a much better job. They said they have penetration with all their high-net-worth individuals. They have credit cards with them, and some of them might have other loans with JPM, but what they don't do is manage a lot of their wealth. Those clients might go to Goldman Sachs or another investment bank. So they feel that with wealth management they could grow with high-net-worth individuals. How they pull them from those other firms, we'll see.
But look: net revenue is up 13.3% year over year, and net income is up 25%. All in all, when you look at the total corporate-wide growth, on both the revenue and profit sides and across the different segments, this is JP Morgan at its absolute finest. This is about as good as it gets, and at least from a shareholder perspective, it's being rewarded.
A couple of other notes from the conference call. Jamie Dimon plans to stay only a couple more years. In fact, he talked openly about it on the call, and they're already planning for that transition. It looks like he may have three or four more years at the bank. The other thing he didn't want to do was give a special dividend. Given these sensational results, they are paying $1.25 per share in common dividends, which came to $3.5 billion. The company continues to buy back stock as well, to the tune of $4 billion. The company could ramp this up even more, but they are not going to do a special dividend. He said it doesn't create shareholder value and that shareholders didn't want it. My guess is they'll keep raising the dividend and keep buying back shares, which, at the current price, are way overextended.
I wouldn't blame any investor, like me, who has bought JPM multiple times over the past few years for under $100 per share, if you reallocate from here. That's totally fine. I also don't blame any investor who just wants to ride this one out and keep holding. Yes, you're likely to see pullbacks in JP Morgan, shorter term, long term, and intermediate term. How steep and how quickly they materialize will decide how far they go. The downside might not be much lower than the current share price. This is not an area where I would be actively accumulating shares of JP Morgan right now. If you missed the boat, if you missed the one-year return, even the five-year returns are pretty decent here. I just want this one on your radar, so when that time comes you can step in. These high-quality companies that a lot of investors tend to ignore can outperform in the short term, especially if you get them at the right price.
That's exactly what we'll be doing over at Blue Chip Stock Investor, which launches relatively soon. We'll be analyzing companies like JP Morgan. I'll also be giving you a full readout and a full report every time these companies report earnings, so you'll get not only a video but a report like this as well. I'll summarize the conference call and the quarter, both in video and written form, so you know exactly what's going on with JP Morgan. When you pull back to these buying opportunities, I'll be there alerting you. I'll be your eyes and ears, I'll be your analyst, and that's what's coming relatively soon. Hopefully you guys enjoyed today's video. I'll be back later today with more. Good luck with your investments.
Comments 0