Stronger than expected outlook ahead
- JPM 4Q23 earnings missed estimates after US$2.9bn fee from regional banks rescue
- FY24F NII guidance beat market expectations
- JPM is likely to continue delivering superior ROE structurally
4Q23 results missed estimates after US$2.9bn fee from regional banks rescue. Total managed revenues of US$39.9bn improved +12% y-o-y/-2% q-o-q, largely in-line with consensus estimates, driven by a +19% y-o-y/+6% q-o-q improvement in net interest income to US$24.2bn, largely driven by higher rates and higher revolving card balances, partially offset by deposit balances. During the quarter, non-interest income of US$15.8bn (+3% y-o-y/-11% q-o-q) declined q-o-q on investment banking revenue miss. Net profit declined 15% y-o-y/30% q-o-q after a US$2.9bn fee from a special assessment charged by the FDIC in relation to the regional banks’ rescue in 2023. Credit costs of US$2.8bn (3Q23: US$1.4bn) included a US$598m net reserve build largely in Consumer and higher net charge-offs of US$2.2bn which was largely driven by card services and Wholesale exposures. CET1 ratio continues to be strong at 15.0% with ROE at 19% (excluding exceptional items) as JPM declared a quarterly dividend of US$1.05/share (previous: US$1.00/share) during the quarter. Loan book grew +17% y-o-y/+1% q-o-q to US$1.3T while deposits was flat y-o-y/+1% q-o-q at US$2.4T.
FY24F NII guidance beat market expectations; outlook remains strong. Management has guided for FY24F NII to be at US$90 billion, well beyond market expectations of US$86.1B. Management remains cautious and believes that inflation may be stickier and rates may be higher than expected, while expressing concern over office building loans and higher default on cards. We continue to maintain BUY on JPM with a revised TP of US$195 (c.12x FY24F P/E) as we believe that JPM Is likely to continue delivering superior ROE structurally compared to peers.