JPMorgan Beats Earnings, Grows Deposits, and Raises Revenue Outlook.

JPMorgan Stock at a Glance

• Fair Value Estimate (USD): 146.00
• Star Rating: 4 Stars
• Uncertainty Rating: Medium
• Economic Moat: Wide

JPM Earnings Update

Wide-moat-rated JPMorgan Chase JPM was able to expand its deposit base in the first quarter, beat our expectations and consensus on net interest income and fees, and materially raise its full-year NII outlook.

Going into the quarter, we thought the largest banks would be fine amid the current banking turmoil, and while we expected profitability to face some pressure in the short term, in the longer term it would not be destroyed.

JPMorgan reported a return on tangible equity of 23% in the first quarter, an exceptional result. Results support our contention that the bank’s moat is as wide as ever. We view the results positively, and while we do not want to read too much into through-the-cycle profitability based on peak earnings, we would expect our current $146 fair value estimate to go up slightly based on these results. We can’t read through too much to the smaller regionals just yet, but so far, we believe current results support our thesis that the banks are undervalued and will get through the current turmoil, and that JPMorgan was also slightly undervalued heading into its April 14 earnings release.

Earnings per share came in at $4.10, beating the FactSet consensus of $3.41 and our own estimate of $3.40. Earnings were strong all around, with NII of $20.7 billion trouncing our projection of $18.8 billion. Fees were also stronger than we anticipated, at $17.6 billion compared with our forecast of $16.3 billion, with trading results being exceptional.

More importantly, we finally have some new data about what profitability may look like in a post-Silicon Valley Bank world. We did not expect first-quarter results to be too affected; the outlook was the more important data point. Here, JPMorgan increased its full-year NII outlook (ex markets) to $81 billion from $74 billion. The bank expects NII to eventually fall to the mid-$70 billion range over the medium term. The big takeaway is that its earnings profile is not being negatively affected by the banking turmoil.