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Inorganic Growth Efforts, High Rates Aid JPMorgan (JPM) Top Line
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JPMorgan’s (JPM - Free Report) global expansion initiatives, along with decent loan demand and higher rates, will likely support net interest income (NII) growth. The company acquired failed First Republic Bank for $10.6 billion, which is expected to be accretive to earnings. The deal adds almost $173 billion in loans and will increase market share among wealthy clients.
Analysts seem to be optimistic regarding JPM’s earnings growth potential. The Zacks Consensus Estimate for its current-year earnings has been revised 11.5% upward over the past 60 days. Thus, JPM currently sports a Zacks Rank #1 (Strong Buy).
Over the past six months, shares of the company have gained 4.9% against a 7.4% decline of the industry.
Image Source: Zacks Investment Research
JPMorgan has been growing through on-bolt acquisitions, both domestic and international. This May, it acquired Aumni and First Republic Bank (an FDIC-assisted deal). Last year, the company announced a deal to buy Renovite, while it acquired a 49% stake in Greece-based Viva Wallet and Global Shares. Likewise, in 2021, JPM announced several acquisitions.
These deals, along with several others, are expected to keep supporting the bank's plan to diversify revenues, and expand the fee income product suite and consumer bank digitally.
Looking at its fundamentals, its NII and net yield on interest-earning assets are expected to continue witnessing growth in the coming quarters as the Federal Reserve is likely to keep interest rates high in the near term to control “sticky” inflation. JPM is projecting NII (managed basis) to be $84 billion this year (including the effect of the First Republic Bank acquisition).
We anticipate the metric to jump 22.7% in 2023. While NII (managed) is expected to fall 4.1% next year, it is expected to rebound and grow 1.4% in 2025.
JPMorgan is focused on acquiring the industry's best deposit franchise and strengthening its loan portfolio. Despite a challenging operating environment, deposits and loan balances have remained strong over the past several years.
As of Mar 31, 2023, the loans to deposits ratio was 47%. Though a potential recession/economic slowdown may hamper loan demand to some extent, the company is expected to be able to capitalize on its scale to record decent loan growth going forward.
JPMorgan has been expanding its footprint in new regions. In 2018, the bank announced plans to enter 25 new markets by opening 400 new branches. It has made substantial progress on this front, with a presence in 48 of 50 U.S. states. In addition to enhancing market share, the strategy will help the bank grab cross-selling opportunities by increasing its presence in the card and auto loan sectors.
However, because of the volatile nature of JPM’s capital markets business and higher mortgage rates, its fee income growth remains challenging. We expect non-interest income (managed) to fall 2.5% in 2023. Mounting expenses pose another major headwind, as we anticipate the same to rise 6.8% in 2023.
Other Stocks to Consider
A couple of other top-ranked finance stocks are Artisan Partners Asset Management (APAM - Free Report) and Capital Southwest Corporation (CSWC - Free Report) .
Artisan Partners’ current-year earnings estimates have moved up 7% over the past 60 days. The company’s shares have lost 0.3% over the past six months. At present, APAM sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Capital Southwest’s current fiscal year’s earnings estimates have moved 2% upward over the past 60 days. The stock has appreciated 6.8% over the past six months. CSWC currently carries a Zacks Rank #2 (Buy).
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Inorganic Growth Efforts, High Rates Aid JPMorgan (JPM) Top Line
JPMorgan’s (JPM - Free Report) global expansion initiatives, along with decent loan demand and higher rates, will likely support net interest income (NII) growth. The company acquired failed First Republic Bank for $10.6 billion, which is expected to be accretive to earnings. The deal adds almost $173 billion in loans and will increase market share among wealthy clients.
Analysts seem to be optimistic regarding JPM’s earnings growth potential. The Zacks Consensus Estimate for its current-year earnings has been revised 11.5% upward over the past 60 days. Thus, JPM currently sports a Zacks Rank #1 (Strong Buy).
Over the past six months, shares of the company have gained 4.9% against a 7.4% decline of the industry.
Image Source: Zacks Investment Research
JPMorgan has been growing through on-bolt acquisitions, both domestic and international. This May, it acquired Aumni and First Republic Bank (an FDIC-assisted deal). Last year, the company announced a deal to buy Renovite, while it acquired a 49% stake in Greece-based Viva Wallet and Global Shares. Likewise, in 2021, JPM announced several acquisitions.
These deals, along with several others, are expected to keep supporting the bank's plan to diversify revenues, and expand the fee income product suite and consumer bank digitally.
Looking at its fundamentals, its NII and net yield on interest-earning assets are expected to continue witnessing growth in the coming quarters as the Federal Reserve is likely to keep interest rates high in the near term to control “sticky” inflation. JPM is projecting NII (managed basis) to be $84 billion this year (including the effect of the First Republic Bank acquisition).
We anticipate the metric to jump 22.7% in 2023. While NII (managed) is expected to fall 4.1% next year, it is expected to rebound and grow 1.4% in 2025.
JPMorgan is focused on acquiring the industry's best deposit franchise and strengthening its loan portfolio. Despite a challenging operating environment, deposits and loan balances have remained strong over the past several years.
As of Mar 31, 2023, the loans to deposits ratio was 47%. Though a potential recession/economic slowdown may hamper loan demand to some extent, the company is expected to be able to capitalize on its scale to record decent loan growth going forward.
JPMorgan has been expanding its footprint in new regions. In 2018, the bank announced plans to enter 25 new markets by opening 400 new branches. It has made substantial progress on this front, with a presence in 48 of 50 U.S. states. In addition to enhancing market share, the strategy will help the bank grab cross-selling opportunities by increasing its presence in the card and auto loan sectors.
However, because of the volatile nature of JPM’s capital markets business and higher mortgage rates, its fee income growth remains challenging. We expect non-interest income (managed) to fall 2.5% in 2023. Mounting expenses pose another major headwind, as we anticipate the same to rise 6.8% in 2023.
Other Stocks to Consider
A couple of other top-ranked finance stocks are Artisan Partners Asset Management (APAM - Free Report) and Capital Southwest Corporation (CSWC - Free Report) .
Artisan Partners’ current-year earnings estimates have moved up 7% over the past 60 days. The company’s shares have lost 0.3% over the past six months. At present, APAM sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Capital Southwest’s current fiscal year’s earnings estimates have moved 2% upward over the past 60 days. The stock has appreciated 6.8% over the past six months. CSWC currently carries a Zacks Rank #2 (Buy).