Deep dives · Initiation

JPMorgan: a superb bank priced for a 20% return against a 17% through-cycle target

We initiate on JPMorgan at Hold with a $311 target, 8.5% below the $339.72 share price. The shares already pay for a 19.5% long-run return on tangible equity, while management guides to 17% through the cycle3 (source: JPMorgan Chase Investor Day 2025 outlook and 17% through-cycle ROTCE target, opens in a new tab). Our quarrel is with the price, not the franchise.

By Vishal Bhargava, CFAOct 19, 202633 pages

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Our reverse residual-income model needs ROTCE to fade only to 19.5% over ten years to justify $339.72; management targets 17% through the cycle3 (source: JPMorgan Chase Investor Day 2025 outlook and 17% through-cycle ROTCE target, opens in a new tab).
We model FY27E adjusted EPS of $24.36, 4.5% below the Street's $25.50: $0.66 from lower revenue and $0.48 from higher expenses4 (source: Yahoo Finance JPM price history, consensus, ratings and peer multiples, 16 October 2026, opens in a new tab).
3Q26 expenses grew 12% against revenue up 8%1 (source: JPMorgan Chase 3Q26 earnings release, opens in a new tab); we model FY27E expenses of $115bn against $113.3bn implied for the Street.
CET1 is 13.9% against an 11.5% requirement1 (source: JPMorgan Chase 3Q26 earnings release, opens in a new tab)8 (source: Federal Reserve large-bank capital requirements and stress capital buffer, opens in a new tab), but 3Q26 net buybacks fell to $0.7bn and Basel III endgame is still a proposal9 (source: Federal Reserve Basel III endgame capital proposal, March 2026, opens in a new tab).
We initiate at Hold with a $311 target, 8.5% below the $339.72 share price; bull case $448, bear case $189.

JPMorgan is the largest US bank and ranks first in US deposits, cards and investment banking fees, but the price already pays for it. At $339.72 the shares need ROTCE to fade only to 19.5% over ten years, while management targets 17% through the cycle3 (source: JPMorgan Chase Investor Day 2025 outlook and 17% through-cycle ROTCE target, opens in a new tab). Costs are running ahead of revenue: 3Q26 expenses grew 12% against revenue up 8%1 (source: JPMorgan Chase 3Q26 earnings release, opens in a new tab). Provisions rise to $12.5bn in FY27E, and Basel III and G-SIB relief is not in our numbers because both are still proposals9 (source: Federal Reserve Basel III endgame capital proposal, March 2026, opens in a new tab)10 (source: Federal Reserve G-SIB surcharge proposal, 2026, opens in a new tab).

Our $311 target is a ten-year residual-income value ($292 at end-FY26E) rolled to October 2027 net of dividends: cost of equity 10.1%, ROTCE fading from 20.1% to 17%3 (source: JPMorgan Chase Investor Day 2025 outlook and 17% through-cycle ROTCE target, opens in a new tab), growth 3.5%. It is 12.8x FY27E EPS and 2.5x October 2027E TBVPS. A peer P/TBV-ROTCE regression gives $3454 (source: Yahoo Finance JPM price history, consensus, ratings and peer multiples, 16 October 2026, opens in a new tab). Bull $448 (20%), base $311 (55%) and bear $189 (25%) give a probability-weighted $308.

Line	FY26E	FY27E	FY28E
Revenue	$201.7bn	$214.0bn	$221.0bn
Consensus	—	$216.3bn	—
Ours vs consensus	—	−1.1%	—
EPS	$23.14	$24.36	$25.32
Consensus	$24.07	$25.50	—
Ours vs consensus	−3.9%	−4.5%	—

A credit cycle with card charge-offs above 4% and provisions of $16bn would take value to our $189 bear case, -$109 a share.
Deposit migration that cuts the net yield by 10bp would take about $14 a share off our value.
A 10% fall in markets and investment banking revenue would take about $12 a share off our value.
Upside risk: final Basel III and G-SIB rules that release $30bn of capital would lift buybacks and add about $8 a share.
Upside risk: further rate rises that lift NII above guidance would add about $16 a share.