Quint Tatro: JPMorgan is my favourite bank stock but I’m still trimming JPM

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Written on Jul 13, 2024

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JPM reported its financial results for the second quarter on Friday.
Quint Tatro explains why he's trimming his position in the bank stock.
JPMorgan stock has already gained well over 20% year-to-date.

Quint Tatro – the founder of Joule Financial is trimming his stake in JPMorgan Chase & Co even though it continues to be his favourite bank stock to own.

The financial services behemoth reported its quarterly results on Friday.

JPM is currently up well over 20% versus its year-to-date low.

It’s time to take profit in JPMorgan stock

JPMorgan came in ahead of Street estimates in its fiscal Q2 on a whopping 52% year-on-year increase in investment banking fees. Still, Tatro told CNBC on Friday:

“While it is certainly the best of breed and probably the best bank in the world, I think this has reached full valuation and even in the best banks, sometimes you got to take profit.”

JPM, however, remains attractive for income investors as it currently pays a rather healthy 2.24% dividend yield.

JPMorgan set aside $3.05 billion for credit losses in its recently concluded quarter versus $2.78 billion expected suggesting the financial services behemoth expects more borrowers to default moving forward.

The New York listed giant saw quite a healthy consumer in its fiscal Q2. On “Power Lunch”, Quint Tatro also said on Friday:

“Traders have gotten ahead of themselves in the anticipation of lower short rates making a better yield curve, improving net interest income. But we think that’s already back into the price.”

CFO Jeremy Barnum also confirmed that JPM did not see early signs of cracks in its commercial and industrial (C&I) loan business in the second quarter. JPMorgan stock is currently trading just below its all-time high.

What would it take for JPM stock to gain further?

JPMorgan Chase & Co raised its outlook further for full-year net interest income.

The Wall Street bank now forecasts about $91 billion of net interest income in 2024 versus $90 billion it had guided for in April. According to Joule Financial’s Quint Tatro:

“Any further upside here [JPMorgan stock] would have to come from surprises out of the consumer or other areas of the bank, which we just don’t see happening.”

JPM bought back $4.9 billion worth of its stock in the second quarter partly with proceeds from $7.9 billion sale of its Visa stake. Still, Tatro does not find the stock worth buying at more than 2 times its book value.

Matthew Stucky of Northwestern Mutual Wealth Management also lauded another strong quarterly report from JPMorgan on Friday but said the investors are losing passion for JPM shares following their outperformance since the start of 2024.