Is JPMorgan’s Valuation Too Cheap to Ignore After a 20% YTD Return?

The bank plans to raise its dividend a second time this year.

Bank earnings give investors an opportunity to take the pulse of the economy, as they typically represent where things are.

The nation’s largest bank, JPMorgan Chase (NYSE:JPM) kicked off Q2 earnings season with some solid results on Tuesday, beating earnings and revenue estimates.

However, both revenue and earnings were down significantly from the same quarter a year ago.

The results prompted mixed reactions from investors, as the stock rose slightly in early trading, but was down about 1% to $286 per share as of 12:00 p.m. ET. JPMorgan Chase CEO Jamie Dimon reflected that uncertainty in his comments.

“The U.S. economy remained resilient in the quarter,” Dimon said. “The finalization of tax reform and potential deregulation are positive for the economic outlook, however, significant risks persist – including from tariffs and trade uncertainty, worsening geopolitical conditions, high fiscal deficits and elevated asset prices. As always, we hope for the best but prepare the firm for a wide range of scenarios.”

In the second quarter, JPMorgan Chase generated revenue of $45.7 billion, which was down 10% year over year and 1% from the previous quarter. However, it was better than the consensus estimate of $44.1 billion.

Net income fell about 17% year-over-year to $15 billion but was up 2% from the first quarter. The gain over Q1 was mainly due to lower provisions for credit losses, reflecting a slightly better economic outlook. Earnings were $5.24 per share, down 14% from the same quarter a year ago, but up 3% from Q1. That easily topped estimates of $4.48 per share.

Numbers Are Better Than They Look

Taking a deeper dive into the results, it is clear that the results were better than they seem on their face. All three of JPMorgan Chase’s major segments – consumer banking, investment banking, and asset management – saw major revenue and earnings gains.

Consumer banking revenue was up 6% year-over-year to $18.8 billion while net income rose 23% to $5.2 billion. Credit card and auto lending led the way, with revenue jumping 15% to $6.9 billion, while noninterest income rose 5% to $9.8 billion. This offset a 5% drop in home lending. Also, provisions for credit losses were down 21%.

Commercial and investment banking revenue was up 9% year-over-year to $19.5 billion, while net income rose 13% to $6.6 billion. Markets and securities services, the company’s trading arm, saw revenue climb 15%, while investment banking revenue increased by about 9%.

Finally, asset and wealth management revenue surged 10% year-over-year to $5.7 billion, as strong equity markets boosted asset levels and fee revenue. Net income climbed 17% to $1.47 billion.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

These numbers would suggest significant revenue and earnings gains. But they were brought down by a big drop in JPMorgan Chase’s corporate segment as revenue fell 85% year over year to $1.5 billion. Net income in this segment was off 75% to $1.7 billion.

This was almost entirely due to changes in funds transfer pricing for consumer deposits as well as lower rates. This stems from a change the firm made in Q4 2024 to its funds transfer pricing, resulting in an increase in the funding benefit reflected within the consumer banking segment net interest income. So, do not read too much into the overall decline in revenue and earnings, as it’s largely due to changes in accounting.

Raising Its Dividend – Again

The company also announced plans to raise its dividend for the second time this year in the third quarter.

The firm declared a $1.40 per share dividend for this quarter, same as last quarter, when it boosted it from $1.25 per share.

On July 1, the board said it would raise the dividend again this year to $1.50 per share. This is the second year in a row that JPMorgan Chase will have had two dividend raises. Before that, they hadn’t done it since 2017. It’s one of the perks of having a fortress balance sheet, which allows the bank to give back to shareholders in uncertain times.

“Earlier this month, we announced that the board intends to increase our common dividend for the second time this year, resulting in a 20% cumulative increase compared with the fourth quarter of 2024,” Dimon said. “We also repurchased $7 billion of common stock. We ended the quarter with a 15% CET1 ratio, which remains far in excess of our required capital levels. In addition, we have an extraordinary amount of liquidity, with $1.5 trillion of cash and marketable securities.”

JPMorgan Chase stock was down about 1% Tuesday but it has returned 20% YTD and 36% over the past 12 months. It’s still trading at just 14 times earnings and remains a great value and a stellar option for investors, with a median price target of $302.50 per share.

Written By: ValueWalk