The nationʻs largest bank, JPMorgan Chase (JPM +0.34%), has long been the most successful bank, particularly since Jamie Dimon became CEO in 2006.
His strategy of building a fortress balance sheet has carried JPMorgan through the difficult times and benefited it in the good times.
JPMorgan Chase has been on an especially good run over the past year or so as rates have stabilized in a sweet spot for lending and net interest income, mergers & acquisitions (M&As) have taken off, and markets have been incredibly active.
Jamie Dimon. Image source: Getty Images.
In the second quarter, JPMorgan set revenue records in every line of its business as revenue surged 27% year over year to $58 billion, and earnings rose 47% to $7.70 per share. In the call with analysts, Dimon said, "It's getting close to as good as it gets. We just don't know how long it's going to last."
Off-the-charts ROTCE
A key metric for banks is return on tangible common equity, or ROTCE, which measures the profit a bank generates from shareholder equity. It is considered a cleaner view of a bankʻs profitability as it strips out goodwill and intangible assets, showing how the bank is growing organically.
Generally, a ROTCE of 15% is considered good, and anything over that is excellent. In Q2, JPMorgan Chase had an off-the-charts ROTCE, excluding special items, of 23%. By comparison, Bank of America (BAC +0.27%) had a ROTCE of 17% while Wells Fargo (WFC +0.18%) had a ROTCE of 17.7%.
JPMorgan Chaseʻs Q2 ROTCE was the highest in almost five years. It has set a high bar for itself, establishing a long-term target of 17% ROTCE. It has exceeded that target every quarter dating back to at least Q4 2023.
Can JPMorgan keep the momentum going?
Dimonʻs recent comments comments were peppered with cautious statements and uncertainty.
"When you have great returns and very good margins, which actually went up this quarter, not down, the notion that somehow you can forever increase your operating leverage is a crazy notion," Dimon said on the Q2 earnings call. "I do think you might actually see a slowdown in growth, maybe a slowdown in 2027 or 2028," he added.
NYSE: JPM
Key Data Points
Then, in a recent interview with CNBC, Dimon cited the mounting risks in the stock market and how he wouldnʻt be a buyer of the broader market at this high valuation level. However, he would consider individual stocks if they are a "great investment."
Is JPMorgan Chase stock a great investment? It has been pretty much since Dimon took the reins 20 years ago, and it remains so.
Strong organic growth should continue as the interest-rate environment remains favorable and M&A activity remains hot. And if there is an economic slowdown, JPMorgan Chase has a great dividend and a fortress balance sheet built to navigate just about any cycle. Itʻs also trading at a favorable valuation with a price-to-earnings (P/E) ratio of 15.
JPMorgan Chase stock remains a great long-term investment in uncertain times.
