JPMorgan Chase's Profit Engine That Remains Undervalued

Core Insights - Markets have recently reached record highs due to improved consumer inflation data and extended U.S.–China tariff truce, increasing expectations for a Federal Reserve rate cut [2][3] - JPMorgan Chase has shown strong performance, beating both top- and bottom-line estimates in 2Q25, and continues to present a favorable risk/reward profile [5][8] Financial Performance - JPMorgan Chase reported a 5% year-over-year increase in average loans and a 6% increase in deposits [8] - The company has achieved consistent growth in net interest income (NII) from $43.6 billion in 2014 to $93.2 billion in the TTM ended 2Q25, representing a compound annual growth rate (CAGR) of 7% [10] - Noninterest revenue (NIR) grew from $50.6 billion to $82.4 billion over the same period, with a CAGR of 5% [10] - The company's net operating profit after tax (NOPAT) has grown by 10% annually since 2014, reaching record highs in recent years [11] Profitability and Capital Ratios - JPMorgan Chase maintains industry-leading profitability with a NOPAT margin improvement from 21% in 2014 to 23% in the TTM [12] - The Common Equity Tier 1 Capital Ratio (CET1) was 15.1% at the end of 2Q25, significantly above the 4.5% minimum required by the Federal Reserve [16] - The Tier 1 Capital ratio stood at 16.1%, also well above the 6.0% minimum requirement [17] Shareholder Returns - Since 2019, JPMorgan Chase has returned $87.7 billion in dividends and repurchased $95.9 billion in shares [20][21] - The current dividend yield is 1.9%, with potential for a combined yield of 5.1% when factoring in share repurchases [22] - The company generated $201.2 billion in free cash flow from 2019 through 1H25, covering its dividend and share repurchase commitments [23][24] Market Valuation - At a current price of $293/share, the market implies that JPMorgan Chase's profits will not grow from current levels, as indicated by a price-to-economic book value (PEBV) ratio of 1.0 [29] - If NOPAT grows at a compounded annual rate of 5% through 2034, the stock could see a 29% upside to $377/share [32]