Credit Suisse JPMorgan (JPM) Cuts EPS on Higher Expenses

Credit Suisse analyst Susan Roth Katzke reiterated an Outperform rating and $184.00 price target on JPMorgan (NYSE: JPM) cut EPS for '22 by 55c to $11.45.

The analyst stated "What sparked the debate (and the 6% share price decline) was the expense guide; management spoke to an outsized increase, to $77bn (we were at $73-$75bn/consensus was lower)—inflation plays its part, as does post-pandemic catch up and a strong sense of urgency with respect to investments (+$3.5bn in 2022). No one likes lowered expectations at this point in the cycle, but if JPMorgan maintains a 15%+ ROTE near term and realizes the targeted payback on its investment agenda…this is the long game. Management has made no secret of its determination to consolidate market share with clear intent to take on the competition, old and new, the latter moving at an exponentially faster pace (recognition of this factoring heavily into the bank’s investment agenda, see our recent meeting note, link below). JPMorgan’s track record and financial discipline— driving more than a decade of ROTEs consistently above the peer group average— ought to increase confidence in the potential payback, with the caveat that $15bn of investment spend is an enormous undertaking, on both tech initiatives and market expansion. With respect to estimates… we’re reducing 2022/2023E to $11.45/$12.85 per share from $12.00/$13.20 to factor in both higher expenses and a more optimistic revenue forecast; our target price is unchanged at $184. Risks (+/-) to the achievability of our estimates and target price tie to the macro and market backdrop (i.e., the level and shape of the yield curve, business and capital markets activity, and credit quality migration), and the efficacy of investment spending."

For an analyst ratings summary and ratings history on JPMorgan click here. For more ratings news on JPMorgan click here.

Shares of JPMorgan closed at $151.27 yesterday.

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