J.P. MorganRecommendation:

BUYIntrinsic Value $80 > $68 Current Price

Mengjia Guan, Vy Le, Yuli Qian

Professor Lawrence Souza

Overview

● Background

● Financial Conditions

● Stock Valuation

● Recommendation

Background

● Type: Public● Traded as: NYSE, JPM● Founded: 2000● Founder: J. P. Morgan● CEO: James Dimon● Headquarters: New York City, NY● Industry: Investment and Customer Banking● Area Served: Worldwide● Number of employees: 265,259 (2015)● Market Value of Stock: $67.89 (Dec. 2015)● Assets: US$ 2.6 trillion (2014)

Operation Segment

● Consumer and Community Banking 46%● Corporate and Investment Bank 34%● Asset Management 12%● Commercial Banking 7%

Products and Services

● Markets & Investor Services● Treasury Services● Investment Management● Private Banking● Wealth Management & Brokerage

Leadership

Jamie DimonChairman and Chief Executive Officer

2004, 11 years

Harvard Business School

Marianne LakeChief Financial Officer

2007, 8 years

Reading University

Gordon SmithCEO, Consumer & Community Banking, Chase

2007, 8 years

Thunderbird School of Global Management

Doug Braunstein Executive Vice President and Chief Financial Officer

1986, 29 years

Harvard Law School

Jes Staley Chief Executive Officer—Investment Bank

1979, 36 years

Bowdoin College

Todd MaclinChief Executive Officer—Consumer & Business Banking

1982, 33 years

University of Houston

S.W.O.T AnalysisStrength

● Strong brand name and good financial position

● Excellent services for customers through extensive

retail network

● Largest bank in US in terms of sales, market value,

assets and profits

Weakness

● Overdependence on the U.S. market

● Stiff competition from other financial service providers

● Fluctuating markets result in instability

Opportunity● Expansion in other countries

● Investments across the world

● Commercial banking, and JVs

Threats● Changing government regulations and financial crisis

like recessions● Unstable mortgage market

Bank Ranking

Rank Institution Name Total Asset($T)

1 JPMorgan Chase 2.58T

2 Bank of America 2.14T

3 Citigroup 1.83T

4 Well Fargo 1.74T

5 Goldman Sachs 865B

Financial Conditions

Sources: Morningstar

Financial RatioGoldman

Sachs JP Morgan Wells FargoBank of America Peer Group

Industry Average Conditions

Profitability (%)

ROA 0.9 0.8 1.3 0.5 0.9 0.5 Good

ROE 10.5 9.8 13.1 4.5 9.4 7.3 Good

Leverage/Liquidity

Profit Margin 34.1 32.0 25.4 20.4 23.3 21.5 Good

Debt to Equity 2.5x 1.5x 1.1x 1.1x 15.7x 1.2x Average

Interest Coverage 2.5x 4.2x 7.7x 2.6x 4.2x 3.7x Good

Overall Good

Financial Conditions

Sources: Morningstar

Financial RatioGoldman

sachs JP Morgan Wells FargoBank of America Peer group

Industry Average Conditions

Equity

Forward P/E 9.7x 9.9x 12.1x 10.3x 10.7x 10x Average

Dividend Yield% 1.2 2.6 2.6 1.2 1.7 2.3 Good

Growth Rate

Revenue Growth% 6.2 -1.1 1.4 -3.4 1.4 -3.7 Good

Net Income Growth% 24 4.7 13.3 49.5 28.9 4.9 Below

Overall Average

Technical Analysis

● Upward trend line

● Big volume coming

● Trending towards $80

● Current Price $68

Target Price $80 > $68 Current Price

Trend Line

Support

Resistance

Valuation: Perpetuity Model

Discount Rate Stock Value Range

WACC 8% $93 High

ERM 9% $80 Medium

CAPM 10% $71 Low

Intrinsic Value $80 > $68 Current Price Premium 17%

CAPM

Risk-Free Rate 3%

Beta 1.2

ERM 9%

R 10%

Year 2014 Estimated 2015 Estimated 2016

EPS $5.29 $6.45 $7.22

Growth 22% 22% 12%

Valuation: Gordon Growth Model

i \ g 1% 2% 3%

i WACC: 8% $ 103 $ 120 $ 144

i CAPM: 10% $ 80 $ 90 $ 103

i ERM: 8% $ 90 $ 103 $ 120

Intrinsic Value $80 > $68 Current Price Premium 18%

CAPM

Risk-free rate 3%

Beta 1.2

ERM 9%

R 10%

Year 2014 Estimated 2015 Estimated 2016

EPS $5.29 $6.45 $7.22

Growth 22% 22% 12%

Valuation: Multiple Model

P/E Multiple U.S. Bank Wells Fargo BOA J.P. MorganGoldman

Sachs Citigroup

Estimated 2015 13.8x 13.3x 12.2x 11.1x 10.1x 9.7x

P/E Ratio Stock Value Range

13x $ 94 High

12x $ 87 Medium

11x $ 79 Low

Intrinsic Value $79 > $68 Current Price Premium 17%

Valuation: DCF Model

Year 2016 2017 2018 2019 2020 2021-TV

EPS 7.22 7.80 8.27 8.6 8.77 8.86

Growth Rate 12% 8% 6% 4% 2% 1%

PV 6.6 6.5 6.4 6.1 51.6 83

Value $79

Weighted Debt 60%

Weighted Equity 40%

R Debt 7%

R Equity 9%

WACC 8%

WACC Stock Value Range

8% $82 High

9% $79 Medium

10% $76 Low

Intrinsic Value $79 > Current Price $68 Premium 16%

Recommendation BUY

Intrinsic Value Scenario 3 Scenario 2 Scenario 1

Perpetuity - $80 5% 10% 25%

Gordon Growth - $80 5% 10% 25%

Multiple - $79 40% 30% 25%

DCF - $79 50% 50% 25%

Sum $79 $80 $78

Intrinsic Value $80 > Current Price $68 Premium 18%

Recommendation BUY

Trades:● Buy Stock● Buy on Margin● Buy Calls● Write Puts● Buy Financial Services ETFs● Buy Financial Services ETFs on Margin● Buy Calls on Financial Services ETFs● Write Put on Financial Services ETFs

Intrinsic Value $80 > $68 Current Price

Questions and Answers

Resources

“JP Morgan and Chase” MBAskool, BrandGuide Banking & Financial Services, Web. 4 DEC.2015

Slide, Blank. Jamie Dimon Dimon, Chairman and Chief Executive Officer (n.d.): n. pag. Web.

"Welcome to Market Realist." J.P. Morgan Looks to Deepen Customer Relationships. N.p., n.d. Web. 06 Dec. 2015.