JPMorgan Lifted to Buy at Goldman on Return, Payout Potential

Goldman Sachs lifted JPMorgan Chase shares to buy with a 16% higher price target.
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JPMorgan Chase (JPM) - Get Report is "well-positioned to defend short-term returns and sustain its dividend over the next several quarters," a Goldman Sachs analyst said Friday, as he upgraded the financial service giant to buy from neutral. 

Analyst Richard Ramsden, who also raised his share price target to $116 from $100, said in a note to clients that JPMorgan has "the highest longer-term return profile of the large banks."

Ramsden said JPMorgan can generate the highest return on average tangible common shareholder equity in Goldman's large-banks coverage after 2020, "as continued market share gains and efficiency improvement offset pressure from lower rates and drive best in class returns."

In a separate note describing a meeting with JPMorgan Chase management, Ramsden said the bank's key areas of focus have shifted from understanding the health implications of the coronavirus, to market liquidity dynamics as revolver draws spiked, to now modeling the paths the economy could eventually take in its recovery."

"The company continues to remain focused on longer term risks, such as the implications on globalization," Ramsden said.

Despite the currently higher risk, the analyst said, "JPM continues to be active in underwriting risk for clients over the cycle."

"However, management noted that there have been certain instances where they have passed on business opportunities due to prudence and considerable uncertainty in pricing risk," Ramsden said. 

"The company noted that in many instances, you can price the risk, but where there are scenarios where risks cannot be adequately assessed and priced, JPM has decided not to underwrite certain transactions."

Last week, JPMorgan Chase posted stronger-than-expected second quarter earnings. But it said it would suspend its share-buyback plans through at least the end of September and set aside more than $10 billion to absorb potential losses on bad loans.

Shares of the New York financial-services giant at last check were off 0.5% to $98.51.