JPMorgan Chase (JPM -1.14%), the largest bank in the U.S. by assets, disappointed the market last week after reporting second-quarter earnings results that fell short of analyst expectations. The bank also suspended share repurchases so it could build capital to prepare for higher regulatory capital requirements in 2023 and 2024. After these two setbacks, is the stock still a buy?

Assessing JPMorgan Chase's quarter

The headline numbers from JPMorgan's Q2 are certainly not what investors wanted to see, but I do think most of this was expected. 

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The Federal Reserve's annual stress testing and consistent warnings from JPMorgan's management team told anyone paying attention that capital requirements were going up, leaving less excess capital at the bank for distributions to shareholders. The bank still has a huge amount of capital but has essentially been a victim of its own success, as the growing size of the bank and other factors have led to higher regulatory capital requirements.

JPMorgan Chase's incredibly strong corporate and investment bank also had its least profitable quarter in five quarters, generating a profit of about $3.7 billion. Investment-banking activity has fallen off a cliff, as events like initial public offerings (IPOs) have been non-existent this year with all of the market volatility and uncertainty. Investment-banking revenue fell close to $2.1 billion from the same quarter one year ago. Still, JPMorgan retained its No. 1 position in investment banking in terms of wallet share.

Loan growth and net interest income still look good

Despite the bank missing estimates, I did see several positive aspects in the quarter. Loan growth continues to move along nicely, and net interest income (NII), the profit banks make on loans, securities, and cash, is also coming in strong.

Total average loan balances grew 2% from the previous quarter and are up 7% year over year. Credit card loan balances jumped 9% in the quarter and are up 17% year over year. Period-end commercial loans are also up 4% from the prior quarter and 10% year over year, with particular strength in middle market banking.

Banks are also in the midst of the most aggressive rising interest rate environment not seen since the Great Recession. NII came in at $15.2 billion for the quarter, up $1.3 billion from the first quarter. Furthermore, management raised its NII guidance and now expects to generate $58 billion of NII excluding markets-related NII for the year, up from prior guidance of $56 billion.

Credit quality remains very strong for the time being, and management is also holding steady its expense guidance of $77 billion for the year.

Is JPMorgan Chase stock a buy?

Despite missing estimates, JPMorgan still generated a 17% return on tangible common equity (ROTCE), which is the profit the bank made on shareholder capital after subtracting intangible assets and goodwill.

This return is right in line with the bank's near-term financial targets. Furthermore, NII continues to improve. Hopefully, investment banking will start to bounce back later this year. Although capital returns will be more modest in the near term, JPMorgan still has a massive amount of capital and is really being constrained by regulators, which is outside of its control.

The bank currently trades around 163% to its tangible book value, or net worth, and less than eight times earnings, both valuations that are historically low in recent years. For this reason, I am rating the stock as a buy because, while the valuation is lower, the business has only gotten stronger in recent years.