JPMorgan earned $21.3 billion during 2012, or $5.20 a share, despite the $6.2 billion hedge trading losses that were trumpeted by the business media and a few politicians. The company's return on tangible common equity during 2012 was 15%, increasing from 11% the previous year.
The company on Tuesday said that its annual net income target "through the cycle" was $24 billion, or $6.28 a share, based on its year-end 2012 share count. JPMorgan's "normalized" earnings target is $27.5 billion, $7.20 a share.
JPMorgan Chase also expects to achieve full compliance with the Federal Reserve's proposed capital requirements, with a Basel III Tier 1 common equity ratio of 9.5% at the end of 2013, rising to roughly 11.5% by the end of 2014, not including share repurchases. Based on regulatory requirements, the company projects it will have $28 billion in excess capital at the end of 2014, again excluding share buybacks.
A Higher Multiple Ahead?
Oppenheimer analyst Chris Kotowski on Wednesday said in a report that there was a change in tone at Tuesday's Investor Day meetings from previous years. "There always seemed to be a cadre of attendees whose questions seemed to betray a view that surely the industry was just kicking the can down the road and was in reality surely on the precipice of calamity," he wrote. At this year's Investor Day, the negative tone "was replaced by ticky-tack fine grain detailed questions about cost saves, branch builds, corporate culture and the like," Kotowski wrote.
JPM CEO James Dimon made it clear that the company was focused on becoming more efficient, and said that major acquisitions were "pretty much off the table." The bank has a goal of $1 billion in annual cost savings, through various efficiency improvements and the elimination of roughly 4,000 jobs.Kotowski called the items JPMorgan focused on during Investor Day, "boring stuff that probably bespeaks a likelihood of higher multiples." The analyst rates JPMorgan "outperform," with a 12-18 month price target of $64.00, estimating the company will earn $6.02 a share this year, with EPS rising to $6.50 in 2014. "JPM remains our favorite name in the group at this juncture as we cannot normally find this kind of quality at 8x our estimate (or 9x consensus)," he wrote.