JPM - JPMorgan: Still Not A Buy After Bank Stress Tests

2024-06-27 08:30:00 ET

Summary

• The leading US banks exceeded the minimum capital ratio requirements in the Fed's annual bank stress tests.
• JPMorgan stock is valued at a premium, suggesting investors didn't expect poor stress test results.
• JPM will not likely increase its stock buybacks aggressively, as it doesn't make prudent financial sense.
• However, JPM's financially stable earnings projections suggest a higher-for-longer Fed should benefit JPM.
• I explain why caution is still warranted on JPM, as market leadership has also rotated out of JPM recently.

JPMorgan: Banks Passed The Fed's Stress Tests

JPMorgan Chase & Co. ( JPM ) investors have likely anticipated the positive results from the Fed's annual bank stress test for 2024. The Fed's stress test results demonstrate the resilience of the US banking industry under a hypothetical severe recession scenario. Accordingly, the 31 banks assessed were found to have exceeded the minimum CET1 capital ratio requirements. However, the projected hypothetical losses of $685B suggest "l arge banks would endure greater losses than in the 2023 test." ...

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