JPMorgan Chase (JPM)
Banca / Servicios financieros
Largest U.S. bank: ROTCE 22% on a TTM basis (29% in Q2'26), fortress balance sheet (CET1 Standardized 14.1%; Advanced 14.2%, so the Standardized ratio became the binding one) and three diversified segments. At ~$356 (P/E 16×, P/tangible book 3×) base-case 5y ~$430 plus the dividend → total return ~+6%/year (~3% appreciation + ~2% dividend): Fairly valued — an exceptional bank at a fair price; total return falls short of the required average return (10%) and well below the required margin of safety.
- Price
- $355.53
- Intrinsic value (5y, base)
- $430
- Total annual return (5y)
- 5.8%
- Status (nominal)
- Fairly valued
- Margin of safety
- +6%
The essentials
- ROTCE 22% on a TTM basis (29% in Q2'26) is the engine: three diversified segments — CIB, the #1 global investment bank, CCB the deposit franchise, and AWM with $7.7 trillion in client assets (+19%) and 40% ROE (capital-light) — that offset each other through the cycle.
- Fortress balance sheet: CET1 Standardized 14.1% ($302.6bn; Advanced 14.2%, so the Standardized ratio became the binding one), ~260bp above the 11.5% regulatory minimum; charge-offs 0.70% (benign), coverage 1.79%. Returned ~$46.8bn over the trailing twelve months (declared dividends $16.3bn + buybacks $30.5bn); the current $50bn buyback program was authorized on Jul 1, 2026, and the current quarterly dividend of $1.50/share was declared on Dec 9, 2025.
- Trades at P/E 16× and P/tangible book 3× — a comfortable premium over comparable balance-sheet banks. Both bars the method sets for a bank (15× and 2.5×) are exceeded → no margin of safety in the multiple.
Intrinsic value — two valuation methods
Total return at 5 years: 5.8%/year = 3.9% appreciation + 1.9% dividend. The target price ($430) is ex-dividend; the $37 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $551 · Multiples $377) exceeds the market price ($356).
Pillars of the analysis
The verdict — today vs 5 years
Today — fairly valued: at $356 trades ~5.8% below its value discounted to today (~$377); the discount is positive but does not reach the margin of safety we require (≥38%).
At 5 years — En valor: the target price ($430) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.
The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$238.
Thesis
The business
JPMorgan Chase is the largest and best universal bank in the U.S.: ~$5.0 trillion in assets, a 20% ROTCE (23% in Q2'26) that no competitor at its scale matches, and a fortress balance sheet (CET1 Standardized 14.1%, Advanced 14.1% — the currently binding ratio —, ~310bp above the regulatory minimum). Three diversified segments — the #1 investment bank in the world, the consumer deposit franchise, and a capital-light $7.7 trillion asset management business with 40% ROE — offset each other through the cycle. It is a high-quality business.
The valuation
A bank is valued on equity — normalized P/E on net income to common and price/tangible book — never on EV: deposits and debt are funding, not capital structure. Normalizing net income to common to ~$60.5bn (a modest haircut for a credit cycle that is benign today), at ~$356 it trades at 16× earnings and 3× tangible book value.
Projecting mature growth (~+3% earnings, plus a buyback that reduces shares ~3%/year → EPS from ~$22.8 to ~$30.7 over five years) and a mild multiple compression toward ~14×, the base case yields ~$430 per share in five years, equivalent to an annual return (CAGR) of ~+3% appreciation, ~+5% with the dividend. It is not a double-digit compounder: a mature bank returns most of its earnings.
The margin of safety
At ~$356, the total return (+6% with dividend) falls short of the required average return (10%) → the discount to the value brought to today is minimal, well below the required margin of safety. The verdict is Fairly valued. Both bars the method sets for a bank converge: the entry P/E (16×) and price/tangible book (3×) exceed their ceilings (15× and 2.5×). It is an exceptional bank at a full price, not a price opportunity.
What to watch
There is no source of discount (missing buyers / motivated sellers): JPM is an ultra-covered mega-cap, at highs, correctly valued. The risk in the case is twofold: today's earnings run somewhat above mid-cycle (benign credit + rates near a peak) — though the provision for credit losses already rose to $14.2bn in 2025 from $10.7bn in 2024 — so paying a premium multiple on elevated earnings is a double premium; and a recession (higher charge-offs, NIM compression, a markets downturn) would hit both earnings and the multiple. The disconfirmer is the credit cycle: if charge-offs keep rising and rates fall, the base erodes.
Educational / informational. Does not constitute investment advice.