Bank of America analysts reiterated a Buy rating on JPMorgan (NYSE:JPM) in a note this week, assessing the top five questions investors are asking about the company.
Analysts maintained a $210 price target on the banking stock, stating that the single biggest risk factor is the company's CEO succession.
"Street overly focused on the day one stock impact, but we believe the real question that investors should be asking is whether the next CEO will be able to retain (and cultivate) the quality of talent, that has been a hallmark of Mr. Dimon's tenure," analysts pointed to Berkshire Hathaway as a potential template for a smooth transition.
Furthermore, regulatory outlook and capital deployment are a significant focus, according to BofA, with JPM operating with ~300bp of excess CET1 capital.
When it comes to tech spending, Bank of America acknowledges JPM has been a leader in tech research and development. However, they feel the question is "whether these investments can expand JPM's lead relative to peers, drive superior growth/market share gains, boost franchise efficiency."
Next, while BofA feels investors are watching for potential tail risk events from higher for longer rates for the entire industry, they state there has also been a focus on potential areas of vulnerability for JPM that "could spring a negative surprise, either on credit quality, or due to disruption from non-banks (Big Tech, digital start-ups, private credit)."
Finally, BofA notes that JPM has delivered an average ROTCE of ~20% over the last three years compared to 17% management through cycle target.
"While higher rates have clearly served as a tailwind, there is a valid question among investors on whether structurally higher interest rates, combined with capital optimization could lead to a better than targeted return profile," the firm concluded.