JPMorgan Chase: Analyst Downgrade Recommendation

Investing.com – Analysts at Baird have advised investors to "sell their JPMorgan Chase (NYSE:JPM)" shares, citing a recent downgrade of the investment banking giant's rating.

In October, the largest U.S. lender by assets reported managed net interest income (NII) of $23.53 billion for the period. This performance surpassed Bloomberg consensus estimates of $22.8 billion.

Net income increased to $12.9 billion, better than expectations due to higher revenues and improved cost discipline, although it represented a 2% decline year-over-year.

JPMorgan anticipates a slight decrease in NII to $22.9 billion this quarter, which would bring its annual total to approximately $92.5 billion. For the 2023 fiscal year, NII stood at $89.7 billion.

Additionally, the bank has allocated $3.1 billion in provisions for potential loan losses, more than doubling the reserves from the same quarter last year.

CEO Jamie Dimon mentioned that while inflation is "slowing" and the U.S. economy shows signs of resilience, the bank remains cautious about several challenges, including large fiscal deficits and global trade restructuring.

In their client note, the Baird analysts, led by David George, praised JPMorgan as "best-in-class," highlighting its scale, skill, and dominant market share, along with an effective management team. Despite this, they believe it's time to take profits as shares have surged over 43% this year and are trading at about 14 times the expected earnings per share for 2026.

The analysts indicated, "We think JPMorgan (and many banks) are over-earning on provisions and net interest margins, and we find the stock to be expensive." They also noted a lack of expectation for aggressive stock buybacks, suggesting such actions would not significantly affect earnings per share at current prices and wouldn't be a prudent use of capital.