Well Run, and Not Yet Fully Priced

Full year results for 2025, published 13 January 2026, and second quarter 2026 results, published 14 July 2026. JPMorgan reports in US dollars. Per-share figures in my valuation table are stated in US cents and are converted here — 2,002.00¢ is $20.02, and 34,840.00¢ is $348.40. All figures are US dollars unless stated otherwise.

JPMorgan Chase is a global financial services company with operations in 66 countries and a whopping 380,000 employees. It generates revenue across three core operating divisions: Consumer and Community Banking, the Commercial and Investment Bank, and Asset and Wealth Management.

It has over 5,000 branches in the United States and manages over $7.1tn of client assets within its wealth and asset management franchise. The market capitalisation is around $915bn and it currently sits on a price/earnings ratio of 17.5 — the ratio of the share price to the earnings per share, in other words how many years of current profit you are paying for.

JPMorgan only offers a dividend yield of 1.6%. That is low even for United States banks, and it is substantially low against United Kingdom banks. HSBC yields 3.6%, Lloyds 3.2% and NatWest 4.8%.

The trade-off is that far more of the capital return comes through buybacks and retained growth than through the dividend, which suits a company compounding book value at this rate but gives the shares very little income support.

Management signalled a dividend increase to $1.65 per share from the third quarter of 2026 alongside the second quarter results.

Earnings per share growth has averaged 17.7% over the last five years. Profitability has oscillated a bit over the years: post-tax profits ran $29.13bn in 2020, $48.33bn in 2021, $37.68bn in 2022, $49.55bn in 2023, $58.47bn in 2024 and $57.05bn in 2025.

During this five-year period they also reduced shares in issue by 11.6% in total.

In 2025 they had very high profitability for the second year in a row. At $57.05bn it was ever so slightly lower than the year before, but because of the shares in issue becoming slightly more concentrated, earnings per share increased to 2,002 cents — that is $20.02 a share.

The valuation table is dated 30 July 2026 and uses 2,658.20m shares, lower again than the 2,696.27m reported at the 2025 year end, so the buyback has continued into 2026.

Reported net interest income for the group rose from $66.7bn in 2022 to $89.3bn in 2023, an increase of 33.9%. This was the result of higher rates repricing the deposit and loan books, and the First Republic acquisition, which added balances as well.

Growth was meagre after that. It went up to $92.6bn in 2024, only a 3.7% increase, and rose again in 2025 but only by 3%, to $95.4bn. Stripping out the Markets business, net interest income was $92.6bn in 2025 and flat on the prior year, so all of the growth came from Markets rather than from the core banking book.

What happens to net interest income if base rates rise only marginally

On an assumption of United States base rates rising only marginally over the next twelve to twenty-four months, by perhaps 0.5% to 1.0% in total, the likely impact is mildly positive but second order. The dominant drivers are now balance growth and balance sheet composition rather than the rate level itself.

The evidence is in the company's own numbers. In the second quarter of 2026 net interest income excluding Markets rose only 4%, driven by higher deposit balances, higher revolving balances in Card Services and higher wholesale loan balances, and largely offset by the impact of lower rates. The chief financial officer made the point directly on the results call: at this level of rates, a change in the mix of interest-earning assets on the balance sheet can overwhelm the rate effect entirely.

Two mechanics work against a straightforward benefit from higher rates. Deposit betas rise as rates rise — the deposit beta being the share of any rate rise that gets passed on to savers — so more of any increase gets passed to depositors rather than retained, and the deposit margin compression the company has been reporting continues. Against that, the securities book reinvests at higher yields over time, which is where a modest rate rise does eventually show up.

The practical answer is that a 50 to 100 basis point increase (a basis point is one hundredth of a percentage point, so 100 basis points is 1%) would probably add a low single-digit percentage to net interest income over a full year, and would matter far less than whether loan and deposit balances keep growing. The company guides to total net interest income of around $105.5bn for 2026, raised at the second quarter, with net interest income excluding Markets of around $95bn, broadly flat despite balance sheet expansion. That guidance is the clearest statement that the rate tailwind has largely done its work.

Non-interest revenue — everything the bank earns that is not interest, principally fees, commissions and trading income — increased from $62.0bn in 2022 up to $87.0bn in 2025, a very good general increase.

Non-interest revenue, 2022 versus 2025

Investment securities losses have significantly reduced over the period. In 2025 there were only -$0.1bn, against much larger losses in the earlier years when the firm was selling Treasuries and mortgage-backed securities at a loss.

Two items inflated reported income in 2023 and 2024 and need stripping out of any trend.

First Republic, 2023

On 1 May 2023 JPMorgan acquired certain assets and assumed certain liabilities of First Republic Bank from the Federal Deposit Insurance Corporation, as receiver. First Republic had failed in the regional banking crisis of that spring, and the deal was done through an FDIC-run auction.

The accounting result was a bargain purchase gain, which is the excess of the estimated fair value of the net assets acquired over the price paid. Because the assets were bought out of a failed bank at a discount to their appraised worth, the difference goes straight to income. The preliminary gain was $2.7bn, finalised at $2.9bn after the one-year measurement period.

The gain was not free money. In the same quarter the firm booked a $1.2bn provision for credit losses to establish a reserve against the acquired lending portfolio, so the net contribution was closer to $2.4bn of net income attributable to First Republic in that quarter. In the two months to 30 June 2023 the acquired business also added $897m of net interest income, $436m of non-interest revenue and $599m of expense.

The lasting effect is on the income line rather than the gain. First Republic added roughly $200bn of assets and a large deposit and lending book, which is a meaningful part of why net interest income jumped 33.9% in 2023, and it brought a wealthy client base into the wealth management franchise.

Visa, 2024

The Visa gain is a legacy of Visa's 2008 flotation. When Visa converted from a bank-owned cooperative into a public company, it issued a special class of shares to its member banks so that those banks, rather than Visa, would carry the cost of the long-running swipe-fee litigation with retailers. JPMorgan has held those Class B shares ever since, carried at a nominal value on its books.

On 8 April 2024 Visa launched an exchange offer for the Class B-1 shares. On 6 May 2024 it accepted JPMorgan's tender of 37.2 million Class B-1 shares in exchange for a combination of Class B-2 and Class C shares. Because the Class C shares are held at fair value and the Class B shares had been carried at close to nothing, the exchange crystallised a $7.9bn net gain, recorded in the Corporate segment in the second quarter of 2024.

The firm disposed of all of the Class C shares by 30 September 2024, including a $1.0bn contribution to the JPMorgan Chase Foundation. This has now happened three times: a $914m gain in 2022, the $7.9bn gain in 2024, and a further $4.6bn gain in the second quarter of 2026 as the unwinding of the structure continues.

The effect on income, costs and operating leverage

Both gains sat in Corporate rather than in the operating divisions, so they flatter the group result without telling you anything about how the businesses traded. The Visa gain also carried its own cost, since the $1.0bn share donation went through expenses in the same quarter.

On operating leverage — the extent to which revenue grows faster than costs — the distortion runs the other way from what the headline suggests. Non-interest expenses rose at an annualised rate of 7.9% over the period, which is very high, but not as high as revenues, so the underlying operating leverage was genuinely positive. Reading it from reported numbers alone would overstate 2024 and understate the following year, since the $7.9bn does not repeat.

The Commercial and Investment Bank supplied the strongest profit compounding. Between 2022 and 2025 its net income rose from $19.1bn to $27.8bn, which is a very good return, and it matches up with the analysis of other banks elsewhere in the file: the investment banking side has really recovered.

Consumer and Community Banking did increase, but only from $14.9bn up to the $18.2bn achieved in 2025.

Consumer and Community Banking

The full name is Consumer and Community Banking. It offers products and services to consumers and small businesses through branches, cash machines, digital and telephone banking, and is organised into three parts: Banking and Wealth Management, which includes Consumer Banking, Business Banking and J.P. Morgan Wealth Management; Home Lending, covering mortgage origination, servicing and the residential portfolios; and Card Services and Auto.

Revenue for this division did rise 39% between 2022 and 2025, which is nothing to sniff at. But provisions increased from $3.8bn to $11.5bn, and expenses rose from $31.2bn to $40.3bn, so the growth in income from the division is not absolutely astounding.

The Commercial and Investment Bank

This really is the area that is pulling away for the company. The full name is the Commercial and Investment Bank, formed in 2024 by merging the former Corporate and Investment Bank with Commercial Banking into a single division. It has two halves.

The two halves of the Commercial and Investment Bank

What is driving the growth is a combination of market share and cycle. The firm ranks first for global investment banking fees and first by markets revenue, and its share of both has risen over the last decade. On top of that, the deal cycle has reopened and trading conditions have been exceptionally favourable.

The second quarter of 2026

In the second quarter the division saw an 86% increase in equities income and investment banking fees rose 30%.

Commercial and Investment Bank, Q2 2026

Equity Markets is the business of trading shares and equity derivatives for clients, together with the financing that sits behind it, principally prime brokerage lending to hedge funds. The 86% rise to $6.0bn came from high client activity and favourable trading in both derivatives and cash equities, across products and regions. Combined with fixed income, total Markets revenue of $12.1bn beat the firm's previous quarterly trading record set at the start of 2026.

Investment banking fees are the commissions earned for advising on mergers and acquisitions and for underwriting new share and bond issues. The 30% rise to $3.3bn was the highest level since 2021, with double-digit growth across all products. Equity underwriting fees of $829m nearly doubled on large flotations and convertible offerings, and advisory fees rose 20% on deals in financial institutions, technology and diversified industries.

Why they are doing as well as they are comes down to three things. Volatility has been high enough to generate client trading volumes without being disorderly. The initial public offering window reopened after two thin years, and JPMorgan holds the largest share of that fee pool. And the acceleration of merger closings pulled fees forward, though management describes the pipeline as remaining quite robust rather than exhausted.

For the group, second quarter net income was $21.2bn, or $7.70 per share. Excluding the $4.6bn Visa gain and $1.0bn of equity investment gains it was $16.9bn, or $6.14 per share, with a return on tangible common equity of 23% — that is the profit earned on the shareholders' money once goodwill and other intangibles are stripped out, and 23% is a very high number for a bank. Every line of business posted record revenue. Management raised full-year guidance for net interest income and expenses, lowered the expected card charge-off rate to around 3.2%, and signalled a dividend increase to $1.65 per share from the third quarter.

Total assets, deposits and loans with the loan:deposit ratio

NAV is net asset value — total assets less total liabilities, the book value of the shareholders' stake.

Assets are increasing at a reasonable, steady rate. Deposits are also increasing but not dramatically, and loans are not shooting up either, though they are slowly increasing.

The loan to deposit ratio has been improving year on year and currently sits at 58%. I do not know how much further this can realistically go, especially with some concern that United States consumers are being squeezed by the potential of higher costs from the Iranian crisis and from tariffs.

The common equity tier 1 ratio is down over the last two years. It currently sits at 14.1%, down from a high of 15.7% in 2024.

I am happy enough with that, and I think their growth figures help to justify it. While you might feel capital ratios should not be an offset against higher or lower profitability, I am aware that there are always risks around banking liquidity and backing balance sheets during moments of stress. What I am looking for is a slightly higher risk reward. I am happy with a higher risk if the rewards are coming through right now. These are by no means risky ratios, but I am happier with higher levels of risk if the company is churning out meaningful profit and growth in the meantime.

Six-year financial history

Pre-tax profit (PBT) is profit before corporation tax; post-tax profit is what is left for shareholders after it.

Overall I am pretty happy with the company. I think it is really proving its potential.

Interestingly enough, the earnings per share growth figures do not back what we might normally see as massive positivity in valuation. The growth rate I am using is a mixed figure, lower than the three-year average but higher than the four-year average.

I think the company is doing a very good job and is very well run. They seem to be able to navigate things extremely well, and they do not seem to be getting themselves into trouble in the way that certain banking operations sometimes do.

The four things that decide the outcome from here:

• Balances, not rates: net interest income excluding Markets is guided broadly flat at around $95bn for 2026. Growth now has to come from loan and deposit balances and from mix, not from the rate level.
• The Commercial and Investment Bank: net income of $9.7bn in the second quarter of 2026, up 46%, with first place in both global investment banking fees and markets revenue. This is where the compounding is coming from.
• Consumer credit: provisions in Consumer and Community Banking went from $3.8bn in 2022 to $11.5bn in 2025. Management has lowered the expected card charge-off rate to around 3.2%, but the United States consumer is the pressure point.
• The share count: down 11.6% over five years and still falling. With a 1.6% dividend yield, the buyback is doing most of the work of returning capital.

I am using the earnings per share figure from 2025 of 2,002 cents, with a growth rate of 15% and a valuation multiple of 9, the multiple reflecting their size.

I am giving them a 5% uplift because we are partially through this year and the figures are coming out okay, and I think they are going to continue doing well within the investment banking arm. The risk factor is 25%, which is quite low for a bank.

One point on the earnings base. The 2,002 cents is the 2025 outturn, and the first half of 2026 has already produced $13.84 of reported earnings per share against $20.02 for the whole of last year, though $1.56 of the second quarter figure was the Visa gain. Excluding significant items the underlying run-rate is still comfortably ahead of last year, so the 15% growth assumption applied to a 2025 base looks conservative rather than stretched on the evidence to date.

VALUATION SNAPSHOT

This gives an actual valuation of 44,459.42 cents, or $444.59 per share, against a current share price of $348.40 — a value opportunity of +27.6%. I am going to give it a buy, not a strong buy, just a buy. I am quite impressed with the company. I think they are doing a good job and they are worthy of investment.

• The rate tailwind has done its work: net interest income excluding Markets was flat in 2025 and is guided at around $95bn for 2026, broadly flat despite balance sheet expansion. A 50 to 100 basis point rise in base rates would probably add only a low single-digit percentage over a full year.
• Deposit betas and margin compression: as rates rise, more of the increase is passed to depositors, and the deposit margin compression the company has been reporting continues.
• The Markets and investment banking cycle: the 86% rise in Equity Markets and the 30% rise in investment banking fees came from exceptionally favourable conditions — high but orderly volatility, a reopened flotation window and merger closings pulled forward. Management calls the pipeline quite robust rather than exhausted, but this is the most cyclical part of the group and it is doing the heavy lifting.
• The United States consumer: Consumer and Community Banking provisions rose from $3.8bn to $11.5bn between 2022 and 2025 while expenses rose from $31.2bn to $40.3bn. There is some concern that United States consumers are being squeezed by the potential of higher costs from the Iranian crisis and from tariffs.
• The loan:deposit ratio: now 58.2% and improving year on year, but I do not know how much further this can realistically go.
• Capital coming down: the common equity tier 1 ratio is 14.1%, down from a high of 15.7% in 2024. These are by no means risky ratios, but the cushion is thinner than it was.
• One-off gains flattering the headline: the $4.6bn Visa gain in the second quarter of 2026 contributed $1.56 of the $7.70 of reported earnings per share. Reading the reported trend alone overstates the underlying picture.
• Very little income support: a 1.6% dividend yield is low even for United States banks and substantially low against United Kingdom banks, so the shares offer almost no income cushion if the rating de-rates.
• Costs: non-interest expenses rose at an annualised rate of 7.9%, which is very high. It has been outrun by revenue so far, but it would bite quickly if revenue growth stalled.

• Net interest income excluding Markets going backwards: flat at around $95bn is the guidance and the base case. An outright decline would mean balance growth had stopped doing the work that rates no longer do.
• Markets and investment banking reverting: if the $12.1bn quarterly Markets record and the $3.3bn of investment banking fees prove to be a cycle peak rather than a share gain, the 15% growth assumption applied to the 2025 base stops looking conservative.
• Consumer credit deteriorating past guidance: the card charge-off rate has been guided down to around 3.2%. A move back up, or a further step change in Consumer and Community Banking provisions from the current $11.5bn, would change the risk factor.
• The capital ratio falling materially further: I am happy with 14.1% while the growth is coming through. If it kept falling without the profitability to justify it, the trade-off I am accepting no longer holds.
• The price closing the gap: the case here is a $444.59 valuation against a $348.40 price. Move the price up towards the valuation and the value opportunity is gone, whatever the quality of the business.