JPMorgan Cautious on Geopolitical Tensions and Inflationary Pressures

Image Source: Hakan Dahlstrom

By Brian Nelson, CFA

On April 12, JPMorgan (JPM) reported mixed first-quarter 2024 results. The company reported revenue of $41.9 billion and adjusted net income of $14 billion, or $4.63 per share, which compared to the consensus forecast of $4.13 at the time. For the first quarter, JPMorgan registered a ROE of 17% and a ROTCE of 21%.

Credit costs totaled $1.9 billion and included $2.0 billion of net charge-offs and a $72 million net reserve release. Average loans were up 16%, including First Republic, while average deposits were up 2%, including First Republic. It ended the quarter with a CET1 capital ratio of 15.0% and tangible book value per share of $88.43, implying a price-to-tangible book ratio of 2.1x.

JP Morgan CEO Jamie Dimon continues to be cautious on the current market environment:

Many economic indicators continue to be favorable. However, looking ahead, (JPMorgan) remain(s) alert to a number of significant uncertain forces. First, the global landscape is unsettling – terrible wars and violence continue to cause suffering, and geopolitical tensions are growing. Second, there seems to be a large number of persistent inflationary pressures, which may likely continue. And finally, we have never truly experienced the full effect of quantitative tightening on this scale. 

JPMorgan is one of our favorite banks, in part due to strong leadership at the top and solid fortress-like balance sheet. Though we don’t include any individual bank in the newsletter portfolios, we do think the Financial Select Sector SPDR (XLF) makes sense for diversification reasons, as showcased in the Best Ideas Newsletter portfolio. Shares of JPMorgan yield ~2.4% at the time of this writing.