JPMorgan Chase & Co. (NYSE: JPM) witnessed a decline in its stock price, but outperformed many of its rivals in the industry. Amid the market turmoil, the stock of JPMorgan rebounded with the support of stable fundamentals and the capacity to generate returns. One of the most essential aspects of the performance of the stock during this period was CEO Jamie Dimon’s purchase of JPMorgan shares amounting to $26.6 million. While broader markets stayed in the red, the CEO of the bank communicated a message of confidence in the company and piled up shares on its weakness. This suggested that the Dimon is optimistic towards JPMorgan’s future and boosted the investor sentiment.
It is said that global market concerns are the most significant drivers for the earnings results for the first quarter of fiscal year 2016. These concerns range from the capital market weakness to the decision of the Federal Reserve to keep its interest rate increase on hold. JPMorgan is also positioned in a way that it will have a better performance compared to its rivals. CEO Jamie Dimon confirmed in an annual shareholder letter that JPMorgan “alone has enough loss absorbing resources to bear all the losses, assumed by CCAR, of the 31 largest banks in the United States.” If needed, the bank has the capacity to absorb any loss in the Fed’s Comprehensive Capital Analysis and Review stress test.
Considering the robust fundamentals of JPMorgan, while market players are wary of the key catalysts for the first quarter of the current fiscal year, we believe that it has covered itself from any decline. The oil market fluctuation led banks to create loan loss reserves against their loans issued to the energy corporations.
A lot of banks sought for shelter as prices took a downturn and the collaterals backing their loans also began to lose value. JPMorgan was the first one to reveal the expansion of its provision reserves during the earnings report for the fourth quarter of fiscal year 2015. It is also necessary to consider that the company has low unused credit line exposure in comparison to its competitors.
Another measure of a company’s value called the tangible book value shows that the bank has boosted its value more than the S&P 500. The JPMorgan CEO stated in his annual letter that, “Our financial results reflected strong underlying performance across our businesses, and, importantly, we exceeded all our major financial commitments — balance sheet optimization, capital deployment, global systemically important bank (GSIB) surcharge reduction and expense cuts.”
Furthermore, with the asset sensitivity of the bank, as well as excess deposits, we believe that the bank is one of the largest beneficiaries of an interest rate hike. Bloomberg data suggest that JPMorgan is anticipated to register $23.8 billion revenue, and earnings per share of $1.26 for the first quarter of fiscal year 2016.
In addition, most of the market analysts following the JPMorgan stock maintain a bullish stance, with 29 out of 36 advocating a Buy. Meanwhile, 6 analysts recommended a Hold, while only one suggests a Sell. The average 12-month price target of the JPM stock stands at $70.