JPMorgan Chase Is Best in Breed, But Near-Term Headwinds Are Likely
Despite the high valuation and decline in its stock price after reporting fourth-quarter and full-year earnings for 2021, I still believe JPMorgan Chase (NYSE: JPM) is a best-in-breed banking stock with its fortress balance sheet and ability to perform well in just about every area of banking. After all, America's largest bank by assets did generate more than $125 billion of revenue on a managed basis in 2021. Nevertheless, the bank may struggle to generate the type of returns that investors have become accustomed to in recent years due to some near-term headwinds. Here's why.
One way to measure JPMorgan's performance on a quarterly and annual basis is through return on tangible common equity (ROTCE), which is the technical rate of return on shareholder capital after removing preferred stock, goodwill, and intangible assets. That's certainly a strong number given the complexity of the bank and the amount of regulatory capital it must hold. In recent years, despite the lumpiness, JPMorgan has largely exceeded the 17% target.
Image source: Getty Images.
Source Fool.com
