What happened

Shares of JPMorgan Chase (NYSE:JPM) gained 42.8% last year, according to data from S&P Global Market Intelligence. That was enough to beat the 28.9% return of the S&P 500 index. 

JPMorgan entered the year with some momentum across its business, after reporting healthy levels of profit in 2018. But the stock fell about 9% that year, which provided an opportunity for value-seeking investors to scoop up what looked like a good value in the financial sector.

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Image source: Getty Images.

So what

JPMorgan delivered solid results through the first three quarters of the year. Return on equity has remained at 15% or better, with returns on tangible equity a few points above that, which reflects healthy profitability across the business. 

The bank faces near-term headwinds. Interest rates are expected to remain low for the foreseeable future, which will put pressure on net interest income. But balance sheet growth and asset mix has been able to mitigate some of that headwind recently. In the third quarter, net interest income was up 2% year over year. Overall net income was $9.1 billion, up 8% year over year.

Also, management continues to control expenses. Noninterest expense increased just 5% year over year last quarter, which is lower than the 14% increase in noninterest revenue.

Now what

Analysts expect full-year revenue to come in at $116.07 billion, up 4.1% over 2018. Earnings are expected to be $10.48, up 16.4% year over year. 

For 2020, the early estimates from analysts call for earnings to be $10.65 -- not much improvement over 2019. The reason probably stems from the low-interest-rate environment, which banks rely on to earn a profit on lending. Plus, JPMorgan is investing in technology and is in the process of opening about 400 new branches in the short term, all of which will require extra resources in the short term. 

Nonetheless, JPMorgan Chase is a best-of-breed bank, and investors should continue to assign a premium valuation to the stock relative to the industry for its consistent above-average returns on equity.