JPMorgan Chase & Co.: 1Q26 strength supports refreshed Overweight call

1Q26 Update

1Q26 results were strong across most lines. The group delivered net income of $16.5bn and diluted EPS of $5.94, equating to ROE of 19.0% and ROTCE of 23.0%. Managed NII was $25.479bn (with NII ex Markets of $23.280bn), complemented by managed noninterest revenue of $25.057bn and total markets revenue of $11.559bn. Adjusted expense of $26.6bn rose in line with the higher activity environment, while net charge-offs of $2.3bn remained consistent with an orderly normalization of credit.

Regulatory and call-report data highlight that 1Q26 was an expansionary quarter for the balance sheet and earnings capacity. Total assets increased 7.0% q-o-q to $4.0tn, driven by both securities growth (securities ex trading +5.7% q-o-q; AFS +8.3% q-o-q) and loans (+2.0% q-o-q). Deposits grew 3.3% q-o-q, with foreign-office balances up 9.1% and domestic deposits up 1.9%; noninterest-bearing balances increased 2.9% and interest-bearing balances 3.5%, leaving the noninterest-bearing share broadly stable at just over 23%. Trading assets rose sharply (+38.5% q-o-q) alongside higher repo/resale activity (+9.5% q-o-q), supporting fee and markets income but also inflating risk-weighted assets and leverage exposure.

Profitability metrics on the bank-entity call-report view also improved. NII annualized off 1Q26 ran above the FY2025 total, while noninterest income annualized about 12% above its 2025 level, driving higher pre-tax income and net income run-rates. Noninterest expense also rose double-digit on an annualized basis, reflecting revenue-linked costs and investment spend. Provision for credit losses on the call-report view was lower on an annualized basis than FY2025, consistent with the modest 0.8% increase in the allowance and a slight dip in the ACL-to-loans ratio from 1.76% to 1.74%. Capital ratios remain strong but ticked down as assets grew: CET1 and Tier 1 ratios fell 21bp to 15.08%, total capital ratio declined 22bp to 16.25%, and the leverage ratio slipped 20bp to 7.63%. We interpret 1Q26 as an above-trend quarter benefiting from strong markets and balance-sheet expansion, but do not extrapolate these conditions linearly for 2026 given expected mean reversion in trading and the inherently more volatile nature of the quarter’s balance-sheet mix.

Flow rows above are not like-for-like point-in-time balances. The 1Q26 annualized column is shown only as a run-rate cross-check against FY2025 totals.

Business Overview

JPMorgan is a diversified global universal bank with leading positions across consumer and community banking, corporate and investment banking, commercial banking, and asset and wealth management. FY2025 results showcase the breadth of the franchise: revenue of $182.4bn and net income of $57.0bn were generated from a balance sheet with $1.49tn of loans and $2.56tn of deposits at year-end, supported by a CET1 ratio of 14.6% and an LCR of 111%. The group’s ability to deliver a 17.0% ROE on this capital base, with total noninterest expense of $95.6bn and provision for credit losses of $14.2bn, underlines the earnings capacity of its diversified business mix even with credit costs past cyclical troughs.

This section retains some legacy portfolio context from prior coverage, particularly around business-line contributions and liability-bucket mix, and should be interpreted as background rather than refreshed 2026 segment disclosure. Since the last full note in August 2025, JPMorgan’s operating posture has remained consistent: management continues to reinvest in technology, controls, and franchise growth while tightening expense discipline where feasible. The 1Q26 call-report data confirm that growth is balanced across loans, securities and trading assets, with funding anchored in a broad deposit base that includes both domestic and foreign-office contributions. The updated model now assumes that through-cycle earnings are driven by moderately higher NII supported by stable-to-growing noninterest income, offset by normalized credit costs and a cost base that reflects structurally higher regulatory, technology, and compliance spend.

JPMorgan operates four main segments:

1. Consumer & Community Banking - credit cards, mortgages, auto loans, and retail deposits.
2. Corporate & Investment Bank - trading, advisory, and investment banking.
3. Commercial Banking - loans and treasury solutions for SMEs and large corporates.
4. Asset & Wealth Management - investment products and private banking.

Asset Allocation and Bonds Portfolio

Total Fixed Income Portfolio: $742 billion (legacy FY2024 benchmark retained as portfolio context pending a full refreshed disclosure bridge).

• U.S.: 60-65% ($445-482B) - Treasuries, agency MBS, municipal bonds, and investment-grade corporate debt.
• Europe: 15-20% ($111-148B) - sovereign and corporate bonds.
• Asia-Pacific: 5-7% ($37-52B) - Japanese and Australian debt.
• Emerging Markets: 10-12% ($74-89B) - sovereign and corporate debt.
• Other / Diversified: 3-5% ($22-37B) - structured products and global funds.

Credit Portfolio (Loans)

By Type:

• Consumer: Credit cards, mortgages, auto loans.
• SMEs: Commercial loans and working capital solutions.
• Corporate: Term loans, revolving facilities, syndicated loans.
• Financial Institutions & Private Credit: Lending to banks and private-equity-backed companies.

Return on Credit (Annual 2024)

Asset-allocation and return-on-credit blocks above are retained from prior coverage as business-context reference points; they are not a full refreshed 2026 portfolio disclosure set.

Liabilities

Total liabilities are illustrated at $4.54tn at March 31, 2026, derived from approximately $4.90tn of assets and about $364bn of stockholders' equity.

• Deposits: $2.93tn (64.6%)
• Short-term borrowings: $0.18tn (3.9%)
• Long-term debt: $0.49tn (10.9%)
• Trading liabilities: $0.24tn (5.3%)
• Other liabilities: $0.69tn (15.3%)

Category amounts above are illustrative, using the current parent liability base and the prior note’s funding-mix weights rather than a fully sourced current parent-liability table. On a regulatory bank-entity basis, deposits were $2.79tn, foreign-office deposit share was 20.74%, and noninterest-bearing deposit mix was 23.09%.

Cost of Deposits (Annual 2024)

2025 Forecast Audit

• The 2025 outturn materially exceeded our legacy 2025E earnings framework, necessitating the refreshed 2026 base case. The prior note, written around August 2025 levels, assumed 2025E EPS of $16.5, ROE in the 16–17% range, cost of risk at 0.30%, and a 15.2x P/E, implying a target price of $375 on a stock price of roughly $250 at that time. Actual 2025 EPS of $20.02 and ROE of 17.0%, supported by revenue of $182.4bn and net income of $57.0bn, demonstrate that JPMorgan generated significantly more earnings than we had expected, in part due to higher realized NII, stronger fee/markets revenues, and a faster-than-modeled scaling of the franchise.
• However, the 2025 cost of risk experience and the shape of credit normalization have also evolved versus the legacy blueprint. Actual 2025 provision for credit losses of $14.2bn equates to a higher effective cost of risk than the earlier 0.30% assumption, and our 2026 base scenario now embeds a more conservative cost of risk of 0.80%. This reflects both the late-cycle normalization now visible in card (with management guiding to a 3.4% card NCO rate in 2026) and the broader macro and regulatory backdrop. We view the 2025 outcome as validating JPMorgan’s ability to deliver high-teens ROE even with more realistic credit costs, rather than as evidence that 2025’s benign credit environment will persist indefinitely.
• Our refreshed 2026 base scenario converts the top-down guidance and call-report read-through into a coherent full-year framework: managed total revenue of $194.0bn, adjusted expense of $105.0bn, and provision for credit losses of $12.0bn yield net income of $62.8bn and EPS of $22.49. This is now our central case and supersedes the legacy 2025E forecast for valuation and recommendation purposes. The 1Q26 result, while strong, is not simply annualized into this forecast; instead, it informs our conviction that the guidance range is achievable and that upside risk exists to fee and markets revenues if activity remains firm, while we retain a normalized approach to credit and expense modeling. In summary, the forecast audit supports a structurally higher earnings base than previously modeled, but also argues for a more conservative cost-of-risk and multiple framework than embedded in the old target price.

Key Financial Ratios

• Key financial ratios in this report should be viewed as a mix of refreshed model outputs and legacy reference benchmarks rather than a fully rebuilt 2026 peer data set. On updated 2026E numbers, we forecast ROE of 17.3% and a 2026E P/B of 2.1x, supported by EPS of $22.49 and a cost of risk assumption of 0.80%. Relative to FY2025 actuals (ROE 17.0%, book value per share $126.99, tangible book value per share $107.56), this implies stable-to-slightly higher profitability on a larger capital base, consistent with our view that JPMorgan can sustain high-teens returns even as credit and operating costs normalize.
• The legacy “Key Financial Ratios” table, retained here as context, was built around the prior 2025E framework (EPS $16.5, ROE 16–17%, P/E 15.2x, P/B 1.7x, and cost of risk at 0.30%). We explicitly treat those ratios as historical reference points, not as current forecasts. The contrast with FY2025 actuals and our 2026E metrics highlights two main shifts: (i) stronger than expected earnings and returns have lifted realized and prospective ROE, and (ii) higher realized and expected credit costs warrant a more conservative stance on through-cycle cost of risk. Our refreshed 2026 model therefore assumes that elevated profitability is the product of both structural advantages and still-favorable, but normalizing, credit conditions.
• Capital, liquidity, and asset-quality ratios also underpin our positive stance. FY2025 CET1 at 14.6% and LCR at 111% provide ample buffers, while the call-report CET1 ratio of 15.08% and leverage ratio of 7.63% at 1Q26 remain comfortably above requirements despite visible balance-sheet growth. The allowance-to-loans ratio of around 1.74–1.76% shows stable coverage, while 1Q26 net charge-offs and provisions align with the trajectory toward our modeled 0.80% cost of risk. Taken together, these ratios support a premium valuation versus global banks, even though we have modestly compressed the target multiple from legacy levels to reflect the higher risk-free rate and elevated equity risk premium.

The ratio table above is retained as contextual peer benchmarking from prior coverage and should not be read as a fully refreshed current-quarter peer screen.

Global Peer Comparison

Scope: added Barclays (UK), ING (NL), Deutsche Bank (DE), Nomura (JP), plus Goldman Sachs and Morgan Stanley for broader benchmarking. The table below is retained as a contextual peer framework from prior coverage unless otherwise updated. RoTE is shown where banks disclose RoTE rather than ROE.

Notes: Totals in USD use period-end rates. Some peers disclose RoTE rather than ROE; values reflect latest FY2024 disclosures used in the prior coverage framework and are retained here as contextual benchmarks rather than as a full refreshed 2026 peer update.

Takeaways

• JPM vs global peers: JPM remains top-tier on scale, capital, and profitability; only ING approaches similar ROE, but with much lower NIM and a more traditional EU retail profile.
• European peers: Barclays and Deutsche operate at lower CET1 than JPM and deliver lower returns, while ING stands out with strong ROE and conservative capital.
• Japan (Nomura): the model skews to markets and securities, so direct NIM comparison is less meaningful than leverage, liquidity, and investment-banking profitability.

2026 Projections

Our 2026 base case is built around managed total revenue of $194.0bn, adjusted expense of $105.0bn, and provision for credit losses of $12.0bn, yielding net income of $62.8bn and EPS of $22.49. This implies 12.3% EPS growth y-o-y from the FY2025 base of $20.02, with ROE rising modestly to 17.3% on a larger equity base. The forecast is consistent with management’s guidance for 2026 managed NII of $103bn (including $95bn ex Markets and $8bn from Markets NII) and adjusted expense of $105bn, and embeds a 0.80% cost of risk assumption that acknowledges late-cycle normalization, particularly in card where the guided NCO rate is 3.4%.

We treat 1Q26 performance as an encouraging but above-trend datapoint rather than the template for the full year. The quarter’s strong managed NII, elevated markets revenue ($11.559bn), and high ROE (19.0%) demonstrate upside to earnings under favorable market conditions and active balance-sheet deployment, but we expect some moderation as trading volumes and risk appetite normalize and as regulatory and funding constraints reassert. Our projections therefore balance the evident revenue momentum and scale benefits against the likelihood of firmer expenses, normalized credit costs, and some compression in capital ratios as growth continues within regulatory bounds.

Scenario table is an approximate managed-basis bridge used as an internal projection input. The published rating and target price rely on the base-case operating view plus the explicit valuation assumptions shown below.

Valuation

We derive our 12-month target price of $340 for JPMorgan using a P/E-based approach applied to our 2026E EPS of $22.49. The implied target multiple of 13.6x reflects the bank’s strong forecast ROE of 17.3%, premium franchise quality, and robust capital and liquidity, but is tempered by a higher risk-free rate environment (US 10Y at 4.46%), a 6.0% country equity risk premium, and a modeled cost of risk of 0.80% that is higher than in our legacy framework. At the May 12, 2026 close of $304.88, the target implies 11.5% upside over 12 months, excluding dividends, which we view as attractive on a risk-adjusted basis for a large-cap financial with JPMorgan’s profile.

Residual income analysis is used as a cross-check on the P/E-based valuation rather than blended into the headline target. That cross-check supports the notion that a premium to book value (2.1x P/B on 2026E) is warranted, given the bank’s ability to generate high-teens ROE on a well-capitalized balance sheet with long-term growth assumptions of 3.0% and a beta of 1.02. Compared with our legacy August 2025 valuation (target $375 based on a higher P/E applied to lower 2025E EPS of $16.5), the current framework embeds meaningfully higher absolute earnings but a more conservative multiple, reflecting a reassessment of sustainable through-cycle profitability, the normalization of credit, and a higher discount-rate backdrop. We believe this recalibrated approach yields a more robust and defensible Overweight call for the current phase of the cycle.

Valuation Snapshot (FY2024/25 Multiples)

Valuation - Cost of Equity Range (Residual Income Model)

Headline target price is P/E-anchored. The residual-income section below is a sensitivity cross-check on valuation range rather than a direct averaging input into the target.

Cost of Equity Assumptions:

• CAPM-derived CoE: 10.6% (Rf 4.46%, Beta 1.02, ERP 6.0%).
• Analyst-applied CoE range: 8.5-9.0% to reflect JPM’s lower franchise risk and premium earnings durability.
• Residual-income cross-check uses estimated 2027E book value per share of $161.36 and 2026E ROE of 17.3%.

Interpretation

• At 8.5-9.0% CoE and 3% long-term growth, the residual-income cross-check yields roughly $383-$418 per share.
• At CAPM CoE of 10.6%, the same 3% long-term growth assumption yields about $303 per share.
• The current $340 target price therefore leans on the refreshed earnings base and peer premium, while the residual-income table frames the valuation range around that core case.

Risks

• Macroeconomic and credit-cycle risk: JPMorgan’s earnings are exposed to shifts in the US and global macro environment, including growth, unemployment, and asset prices. A sharper-than-modeled downturn could drive higher-than-assumed credit losses, particularly in consumer and card portfolios where management is guiding to a 3.4% NCO rate in 2026. Such a scenario could push cost of risk above our 0.80% assumption, pressure earnings, and challenge our high-teens ROE outlook, potentially compressing the valuation multiple.
• Regulatory, capital, and liquidity risk: The bank operates under stringent US and international regulatory frameworks, including capital, liquidity, leverage, and resolution requirements. Further changes to capital rules, stress-testing regimes, or liquidity standards could raise binding constraints and limit balance-sheet growth, capital returns, or business mix flexibility. The 1Q26 call-report data show modest declines in CET1, total capital, and leverage ratios as assets grew; a more aggressive regulatory stance or unexpected supervisory outcomes could necessitate higher capital buffers, reducing return on equity and constraining valuation upside.
• Interest-rate and markets risk: JPMorgan’s earnings are sensitive to the level and shape of the yield curve, as well as to market volatility and client activity in trading and investment banking. A faster-than-expected decline in rates or a significant flattening of the curve could weigh on NII relative to the $103bn 2026 guidance, while a sustained slowdown in markets activity could reduce trading revenues from the elevated 1Q26 levels ($11.559bn). Conversely, spikes in volatility or dislocations in funding markets could negatively impact trading and balance-sheet management, even if they provide episodic trading opportunities.
• Franchise, operational, and conduct risk: As a systemically important institution with complex global operations, JPMorgan faces ongoing operational, technology, cybersecurity, and conduct risks. Failures in risk management, major cyber incidents, control breakdowns, or significant enforcement actions could lead to financial losses, higher expenses, and reputational damage. These risks could also trigger additional regulatory scrutiny and capital or liquidity surcharges, undermining the sustainability of high-teens ROE and challenging the premium valuation we ascribe to the franchise.

Conclusion

Our refreshed work following FY2025 actuals and the strong 1Q26 print leads us to reaffirm JPMorgan as an Overweight with a 12-month target price of $340, implying 11.5% upside from the May 12, 2026 close. The bank has demonstrated structurally higher earnings power, with FY2025 EPS of $20.02 and ROE of 17.0% providing a solid base for our 2026E EPS of $22.49 and ROE of 17.3%. While we treat 1Q26 as above-trend and do not extrapolate its performance linearly, it reinforces our conviction in the revenue, funding, and capital strengths underpinning the franchise. We have recalibrated our valuation to a more conservative multiple than in the legacy note, reflecting a higher-rate, higher-risk-premium environment and a more realistic view of credit normalization, but the resulting risk/reward remains attractive. For professional investors seeking high-quality, liquid exposure to US financials with proven through-cycle resilience, we recommend maintaining or building Overweight positions in JPMorgan, adding on periods of market-driven weakness rather than chasing short-term momentum driven by strong quarterly prints.

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