Macquarie Sees JPMorgan As 'Pretty Much There,' Downgrades

Over the past two years, JPMorgan Chase & Co. JPM has moved from trading at a 19 percent discount valuation to a 7 percent premium valuation, which Macquarie’s David Konrad views a warranted, given the company’s “relatively less volatility of earnings, better-than-peer ROTCE and market share gains.”

Konrad downgraded the rating on the company to Neutral, while lowering the price target from $72 to $70.

Challenging Environment

However, the analyst expects the interest rate environment to continue to be challenging, while cost saving expectations are mostly factored into the consensus forecasts.

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“Moreover, a meaningfully improved ROE may be challenging with higher-than-peer required capital buffers,” Konrad mentioned.

In-Line Expectations

The analyst pointed out the revised estimates were now 1 percent below consensus for 2017 and 2 percent below consensus for 2018, which can be considered as relatively in line.

“Although we expect continued strong loan growth and operating leverage, the interest rate environment remains a headwind for NIM and expense initiatives are largely embedded in expectations,” Konrad cautioned.

Capital Distribution

On the other hand, the analyst expects capital distribution to remain strong, although greater improvement is likely from some of JPMorgan Chase’s peers.

The EPS estimates for 2016, 2017 and 2018 have been lowered to reflect the rate and capital market expectations.

Full ratings data available on Benzinga Pro.