JPMorgan Chase

JPMorgan Chase is the largest bank in the United States: $5.0 trillion of assets, $5.1 trillion of client money under management, the leading investment bank in the world by fees, and a retail bank — Chase — that holds the savings and credit cards of a very large share of American households.

A ten-year-old version: people and companies leave money with JPMorgan because it is safe and convenient, and JPMorgan pays them very little for it. It lends that money out at higher rates, invests the rest, and charges fees for everything it does on top — moving money, issuing cards, advising on takeovers, trading securities, managing fortunes. The gap between what the money costs and what it earns, plus the fees, minus the salaries and the bad loans, is the profit.

Every bank does that. The reason JPMorgan is worth nearly $900 billion when most banks are worth a fraction of their book value is that it does every part of it at a scale and a cost nobody else matches, and it has done so for twenty years under one chief executive.

★ Most banks are machines for turning a thin margin into a thin return. JPMorgan has turned it into a compounder. Earnings per share rose more than threefold between 2016 and 2025 — about 14% a year — through a pandemic, a regional banking crisis and the fastest rate increases in forty years. There are very few banks anywhere of which that is true, and none of this size.

⚠️ A timing note. JPMorgan reports its third quarter in mid-October 2026, after this analysis. And this analysis was written in an unusual week: the Federal Reserve raised interest rates on 16 September for the first time since 2023, and on 23 September the ten-year Treasury yield closed above 5% for the first time since 2007. Bank shares fell sharply that day — JPMorgan by 3.4%. We come back to it in Part V, because for a bank it is the most important thing that happened this year.

Second quarter of 2026, managed revenue of $58.0bn, up 27% — or 15% without the one-off gains. Shares of revenue, and each business's return on its own equity:

Notice where the best returns are. The trading floor makes the headlines and, this quarter, most of the growth. But the 34% return on equity is in Chase — branches, current accounts and credit cards — and the 48% is in wealth management. Those are the businesses that compound quietly, grow with the country and do not depend on markets being excited. They are why JPMorgan earns what an ordinary bank cannot.

And notice what is really growing. Net interest income excluding markets — the core spread business — grew only 4%, to $23.7bn. Markets revenue grew 35%. This was a quarter in which the cyclical part of the bank carried the steady part, which is exactly the part of the record an owner should discount.

On 14 July JPMorgan reported net income of $21.2 billion for the second quarter — $7.70 a share, a 29% return on tangible equity, and the largest quarterly profit in the bank's history. Almost every headline stopped there. It should not have.

Start at the top. JPMorgan swapped its Visa class B-2 shares in Visa's exchange offer in May and booked a $4.6bn gain, plus $1.0bn of gains on other equity investments. Together they added $1.56 a share. The bank says so itself, on the first line of its release. Without them: $16.9bn, $6.14 a share, a 23% return on tangible equity.

The same thing ran the other way six months earlier: the fourth quarter of 2025 carried a $2.2bn reserve for taking over the Apple Card portfolio from Goldman Sachs, which cost 60 cents a share. Clean both quarters and the last twelve months earned about $22.38 a share, not the $23.34 our feed reports. The trailing price-earnings ratio is 15.0×, not 14.4×.

★ Even clean, this was a boom quarter, and the chairman said so. Equity trading revenue rose 86%. Investment-banking fees rose 30%, to their highest since 2021. Jamie Dimon's own description of the quarter was "a particularly favorable environment with an elevated level of market activity" — and in the same statement he warned that risks were shifting "below the surface like tectonic plates". When the man who runs the bank tells you the weather was unusually good, believe him.

So what is the normal earning power? JPMorgan's own through-the-cycle target is a 17% return on tangible equity; it earned 20% in 2025; it earned 23% clean in the best quarter in its history. On tangible book of $113.35 a share, that is roughly $19.30, $22.70 or $26 of annual earnings. At $336, between 13 and 17 times — depending entirely on which of those three you believe is the new normal.

When we wrote about Bank of America in July, we explained why banks are valued on tangible book — the equity left after subtracting goodwill — and on the return on tangible equity they earn from it. Here is the next step, and it is the one that explains why JPMorgan trades at almost three times its book while many banks trade below theirs.

A bank is worth its tangible book multiplied by how much more it earns than investors demand. If a bank earns exactly its cost of equity, it is worth its book and no more — every dollar retained earns only what an owner could get elsewhere. If it earns double, the same dollar is worth much more than a dollar. The simple arithmetic, with growth held at the ~5% JPMorgan roughly retains and reinvests, is:

Price ÷ tangible book = (return on tangible equity − growth) ÷ (cost of equity − growth)

That is the second panel of the chart above. At $336 the shares trade at 2.96× tangible book, which is what you get from a 20% return and a 10% cost of equity — or a 23% return and 11%. The price is not assuming a boom. It is assuming that 2025 was normal and that investors keep demanding about 10% a year from the best bank in America.

★ And here is why that matters this month. The cost of equity is not a constant. It is, roughly, what a Treasury pays plus the extra an investor wants for owning a bank. When the ten-year was 4%, 10% was a generous demand. With the ten-year at 5.12%, it starts to look thin. Move the cost of equity from 10% to 11% and the same 20% bank is worth $283, not $340. Nothing about JPMorgan has to go wrong for that to happen. The bond market only has to stay where it is.

What higher rates do to JPMorgan's income statement is mostly good. A bank that pays little for deposits and lends at market rates earns a wider spread when rates rise, and JPMorgan raised its interest-income guidance in July before the Fed moved. It is also a large, liquid bank with $1.5 trillion of cash and marketable securities; it is not a regional lender that bought long bonds at the bottom and has to sell them at a loss.

What higher rates do to the rest is not. Three things, in order of how quickly they arrive:

First, the multiple — the arithmetic in Part IV. A higher risk-free rate raises the return investors demand from a bank, and the justified price of the same earnings falls. That part is immediate and it happened on 23 September.

Second, capital. For the largest banks, unrealised losses on securities held as available-for-sale flow through to regulatory capital. A ten-year at 5% trims the cushion — not dangerously at a CET1 ratio of 14.1% against 11.5% required, but it is the cushion that funds the buyback.

Third, credit — slower, and the one that matters most. Higher mortgage, card and business-loan rates eventually strain borrowers. JPMorgan's card net charge-off rate was 3.34% in Q2 and total net charge-offs were flat at $2.4bn, so there is no sign of it yet; and the bank is in the middle of absorbing roughly $20bn of Apple Card balances, a portfolio it reserved $2.2bn against before it arrived.

★ The honest summary is that a hiking Fed helps JPMorgan earn more and makes each dollar of those earnings worth less. For a long-term owner the first effect compounds and the second reverses when rates do. For someone buying today, the second is the one that sets the price — and today's price was set before it.

Type: cost advantage and scale, reinforced by trust. Width: wide. Trend: widening — every crisis of the last twenty years has ended with JPMorgan larger relative to its competitors, including 2023, when it bought First Republic from the regulators. That is the rarest kind of moat: one that gets deeper when the water gets rough.

Integrity: no veto. JPMorgan has paid large fines over the years — $920m for spoofing in 2020, about $348m over trade surveillance in 2024 — which in a bank this size is a recurring cost of doing business rather than a character flaw, but it is not nothing. Capital allocation: outstanding. It bought back almost a quarter of its shares since 2016, held its dividend flat for two years when capital rules tightened rather than stretch, and bought First Republic from the FDIC in 2023 on terms that were immediately profitable. Owner mentality: Dimon has run it for twenty years as if he owned it.

⚠️ The one thing we cannot score yet is the successor. The board has done this carefully — two candidates, both long-tenured, both paid to stay — and the best thing a departing great CEO leaves is a culture rather than a person. But nobody has yet run JPMorgan who was not Jamie Dimon, and for a business that is "partly trusting the people", that is a real unknown.

Most screening data is built for companies that make things. A bank's balance sheet — where deposits are liabilities, loans are assets and cash flows sideways through operations — breaks almost every standard ratio. Here is what the screen says, and why it is wrong:

★ On 15 September 2026 JPMorgan's board declared a quarterly dividend of $1.65, up 10% from $1.50, payable after an ex-dividend date of 6 October. Our data pull still shows $1.50. The annual rate is now $6.60, a yield of 1.96% at $336.01. The increase had been signalled on 24 June, the day the stress-test results were published.

★ The JPMorgan dividend is small, safe and growing — and it is not the point. At under 2% it will not interest an income investor, and the bank prefers buybacks precisely because they can be switched off without the stigma of a cut. The real return to an owner is the 29.5% paid out, plus the ~5% a year of shares retired, plus growth in book value. Compare the approach at American Express and Bank of America: same philosophy, different quality of earnings underneath it.

So what does 2.96 times assume? That JPMorgan keeps earning around 20% on tangible equity — its 2025 level, three points above its own long-run target — and that investors keep accepting about 10% a year for owning it, with a Treasury now paying 5.12%. Neither is unreasonable. Together they leave no room for a normal year to look like a normal year.

★ The arithmetic for a buyer today. A 2% dividend, about 5% a year from buybacks and roughly 5% growth in tangible book gives you something near 10–12% a year if the multiple holds. That is a fine return from the best bank in America. But the multiple was set in a world with a 4% ten-year, and this week that world ended. At $285 the same bank prices in 11%, and the return to an owner rises by the difference.