JPM_f16

The Henry Fund
Henry B. Tippie School of Management
Husam Atari [husam-atari@uiowa.edu]
JPMorgan Chase & Co. (JPM) September 16, 2016
Financial Services – Diversified Banks Stock Rating Hold
Investment Thesis Target Price $70.00
We recommend a HOLD for JPMorgan Chase & CO. (JPM). On the one hand,
JPM has outperformed analyst expectations the past six quarters, should be
spurred by a stronger broader economy, and is a dominant player in the
commercial and investment banking spaces. On the other, JPM may be riskier
than it was before the financial crisis, faces a regulatory environment that will
strain its return on equity, and holds a high volume of complex assets/liabilities
– both on and off its balance sheet. Thus, while our models indicate JPM is
currently undervalued by 6%, we are cautious about the headwinds
mentioned.
Drivers:
• In each of the past six quarters, JPM has beat consensus EPS estimates by
an average of 12 cents (or 9%) per quarter.
• Real national and global GDP should continue to grow at 2% and 3%,
respectively, fostering 4.58% CAGR for JPM’s assets through 2020, higher
than its historical 4.34% CAGR.
• The Fed will implement four to six more 25 bps rate hikes through 2020,
helping JPM increase its net interest income at a 5.44% five-year CAGR and
improve its GAAP-basis net interest margin by 23 bps.
• JPM is the market leader in commercial and investment banking, earning
13.5% of all FDIC-insured bank revenue and 7% of all global investment
banking fees.
Risks:
• JPM has $515B in complex and difficult to value assets and liabilities, as
well as $940B in off-balance sheet exposures, which could present material
financial risk if such items are mispriced and/or underestimated.
• Due to regulations requiring JPM to increase its levels of equity, its return
on equity of 8.54% in 2020 will fail to exceed its cost of equity of 8.58%.
• Based on recently released data, JPM may be riskier now than it was before
the financial crisis as risk metrics such as its volatility, beta, CDS spread, etc.
have all increased.
Henry Fund Formal EDCF $73.32
Henry Fund Simple EDCF $69.66
Henry Fund DDM $69.51
Relative P/B $75.01
Price Data
Current Price $65.82
52wk Range $52.50 – 69.03
1yr Target Est. $70.56
Key Statistics
Market Cap (B) $237.7
Shares Outstanding (B) 3.61
Institutional Ownership 76.20%
Beta 1.26
Dividend Yield 2.92%
Est. 5yr Growth 4.45%
Price/Earnings (ttm) 11.15
Price/Earnings (FY1) 10.60
Price/Book (mrq) 1.05
Profitability
Net Interest Margin FY15 2.14%
Return on Assets (ttm) 0.98%
Return on Equity (ttm) 9.71%
Henry Fund Earnings Estimates
Year 2013 2014 2015 2016E 2017E 2018E
EPS $4.39 $5.34 $6.05 $5.93 $6.31 $6.63
growth -15.93% 21.70% 13.41% -2.10% 6.47% 5.00%
12 Month Performance Company Description
JPMorgan Chase & Co. is a Diversified Bank that
offers a wide array of includes commercial
banking, investment banking, asset management,
and derivatives products and services. JPMorgan
Chase & Co. is headquartered in New York, NY but
its operations span across the globe. It is one of
the world’s largest banks, by assets.
Tearsheet sources: Yahoo! Finance; FactSet
1.1
9.7
2.9
1.4
10.2
2.9
1.1
9.6
3.0
0
1
2
3
4
5
6
7
8
9
10
11
12
P/B ROE Div. Yield
JPM Sector Industry
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
S O N D J F M A M J J A S
JPM S&P 500
Important disclosures appear on the last page of this report.

EXECUTIVE SUMMARY
We expect the national and global economies strengthen
even further in the coming years, which will help JPM’s
growth prospects. Specifically, we foresee continued rate
hikes, higher consumer confidence, tighter labor markets,
and increased residential and commercial real estate
development. Consequently, JPM’s five-year story is one
of sturdy growth at 4.58%, compounded annually, for
assets, 6.50% for loans, and 5.44% for net interest income.
These growth assumptions drive our various financial
models which produce intrinsic values ranging from
$69.51 to $75.01 and, in turn, our $70 target price. Given
that JPM currently trades at $65.82, it is undervalued by
6.%.
However, despite this growth story and slight upside, we
are only recommending a HOLD because we are concerned
about JPM’s risk profile and ability to incur new regulatory
costs without sacrificing too much profit. In particular, JPM
has a host of complex assets and liabilities on and off its
balance sheet which could adversely affect its growth. Also
per a variety of metrics, JPM may not have reduced its risk
since the financial crisis – despite adhering to a host of new
regulations. Moreover, due to even further regulations,
JPM’s return on equity is on a trajectory to fall short of its
cost of equity by 2020.
Ultimately, an investment in JPM comes with solid growth
potential, as well as unique risks. The combination of
which suggests it is close to fairly valued at its current
price.
COMPANY DESCRIPTION
JPMorgan Chase & Co. (JPM) is a financial conglomerate
and bank holding company. JPM operates in 60+ countries,
employs over 240,000 people and has approximately
5,366 branches worldwide.i
Through Fiscal Year 2015, JPM
was the world’s seventh largest bank, as well as the largest
bank in the US, in terms of asset size ($2.41T at the end of
FY2015).ii
JPM achieved this stature through a series of
mergers and acquisitions of various banks and financial
companies. Two of which are particularly noteworthy. The
2000 merger of J.P. Morgan & Co. and Chase Manhattan
Corp., a $31B deal that combined two of the top five
largest banks in the US at the time and created the JPM
umbrella we know today.iii
Additionally, the 2004
acquisition of Bank One, a $58B deal that gave JPM a much
stronger retail and credit card presence and put Jamie
Dimon at the helm as CEO, who is still leading JPM today.iv
JPM has four major segments: Consumer and Community
Banking (CCB), Corporate and Investment Bank (CIB),
Commercial Banking (CB), and Asset Management (AM).
JPM also has a Corporate segment, that is a function of its
Treasury and Chief Investment Office (CIO).
Because of the overlap among departments and the
consolidated nature of JPM’s income statement, we did
not breakdown our forecasts by segment. Rather we
focused on each line item in the balance sheet and income
statement.
How JPM Makes Money
While the business segments highlighted above explain
the wide variety of products and services JPM offers, we
use different groupings to illustrate how JPM turns such
products and services into money. Specifically, five
categories that we labeled in the following manner: (1)
traditional banking, (2) complex banking, (3) investment
banking, (4) AM fees and commissions, and (5) other
banking.
Traditional banking consists of operations we view as
straightforward and relatively common among banks in
general. On the non-interest side, this includes lending and
deposit-related fees, mortgage fees and card income. On
the interest side, this includes interest income from loans,
securities borrowed, federal funds sold, and deposits with
other banks. The interest side represents the money JPM
earns via borrowing at one rate, through deposits and
other debt, and lending at another. The non-interest side
represents the fees associated with such dealings, as well
as credit card issuances. From 2011-2015, traditional
banking averaged 51% of JPM’s gross revenue.

Complex banking is the money JPM earns from its more
esoteric activities, mostly involving derivatives trading.
Derivatives are contracts that derive their value from
movements in the underlying asset referenced in the
contract. Relatedly, JPM’s second and third largest
individual sources of gross revenue, behind interest
income from loans, are principal transactions and interest
income on trading assets.
Principal transactions is a complicated line item that
includes realized and unrealized gains/losses on
derivatives stemming from market-making services and
private equity investments. It also includes gains/losses
from risk management transactions such as hedging
credit, commodity, and foreign exchange risk. In other
words, this line item seems to be the money JPM makes
when it facilitates a derivatives trade for a client and/or
takes a derivative position for itself to hedge against a
certain type of exposure.
Interest income on trading assets represents the interest
that JPM earns on a variety of fixed-income and derivative
assets that it holds in its trading portfolio. These
instruments include a variety of mortgage-backed
securities (MBS), purchased loans, corporate debt, as well
as a range of credit, foreign exchange, equity, and
commodity derivatives receivable. From 2011-2015,
principal transactions and interest income on trading
assets averaged 9% and 8% of total gross revenue,
respectively. Put differently, 17% of JPM’s revenue comes
from complex banking.
Investment banking represents the fees JPM makes when
it underwrites a debt or equity offering or advises a
company on M&A, restructuring, etc. Investment banking
has averaged 6% of JPM gross revenue the past five years.
AM fees and commissions includes AM fees,
administration fees, brokerage commissions, and all other
commissions and fees. Mostly simply, AM fees and
commissions represents the money JPM collects for
managing investor money – about 14% of gross revenue,
on average, for the past five years.
Other banking includes other income and interest income
on other assets. We also grouped securities gains (losses)
and interest income on securities in this category. While
investing in certain securities, broadly speaking, is a
traditional banking operation, some types of securities
JPM earns gains (losses) and/or interest income from are
much more complex than those in the typical bank
portfolio. For example, collateralized loan obligations
(CLOs), other asset-backed securities (other ABS), and non-
US mortgage-backed securities (foreign MBS) currently
make up 21% of JPM’s $290M securities portfolio. These
are securities that differ greatly from the more standard
US treasuries, muni bonds, agency MBS and investment
grade corporate debt. However, 37% of JPM’s securities
portfolio does consist of such securities. Thus, we did not
feel confident labeling JPM’s securities activity as complex
either. In short, some of JPM’s AFS and HTM securities
were too esoteric for us to consider activities pertaining to
them traditional. Yet, other securities were too standard
to label related activities complex. Hence, our use of the
other category here. Other banking has averaged 12% of
gross revenue the past five years.
Source: JPM 10K
Moving forward, we expect the general historical
breakdown to remain essentially the same. However, we
do expect slightly more of JPM’s total revenue to come
from traditional banking. This expectation is based on two
factors: (1) as rates normalize, JPM will make more loans
and churn more interest income from such loans; (2)
continued phase-in of various regulations (i.e., Dodd
Frank, Basel III, etc.) will tilt banks toward more
conventional income streams.

Source: Model projections
Income and Profitability
Now that we have examined JPM’s sources of revenue, we
turn to how much money JPM actually makes. JPM does
not report gross revenue but it can be calculated easily by
adding non-interest revenue and total interest income.
Gross revenue stood at $101B for FY2015 but has declined
from 2011-2015 at a CAGR of -2.23%. This has been driven
by a steep drop in total interest income, which represents
52% of gross revenue on average. From 2011-2015, total
interest income has fallen from $61B to $51B, or a 16.84%
decrease. Given the interest rate environment of the past
five years, this is unsurprising. However, as rates being to
normalize over the next five years, we expect total interest
income to rebound and grow at a 6.58% CAGR through
2020, fueling a 4.37% gross revenue CAGR in that same
time frame.
In terms of non-interest revenue, it has remained steady
at $50B the past five years, we expect to slightly grow the
next five years at a CAGR of 1.90%. The growth will
primarily come from principal transactions and AM fees.
With principal transactions it is difficult to tie such a
complex line item to a particular economic variable.
Additionally, historical trends were all over the place, such
as a 44% decline in 2012 and an 83% jump in 2013. Thus,
we examined the pace principal transactions was on for
2016, based on performance through Q2, and tied our
projections to that. Specifically, principal transactions is on
pace to grow 5-6% this year relative to 2015. Accordingly,
we set a growth rate of 5% through 2020. As for AM fees,
while some fee compression is likely to occur due to the
competitive environment in the space, such compression
will be more than offset by growth in assets under
management (AUM). Specifically, we expect the AM fee
ratio (i.e., AM fees/avg. AUM) to decline from an average
of 5.55 from 2011-2015 to an average of 5.34 for 2016-
2020 and AUM to grow at a 4.57% CAGR. This growth in
AUM expectation is based on JPM’s continued investment
and expansion of AM, such as its recent business license to
operate in China.v
JPM does report net revenue, which is gross revenue
netted for interest expense. Within this, net interest
income (i.e., total interest income- interest expense), has
decreased from $48B to $44B from 2011-2015, or a decline
of 8.88%. However, it has remained steady in the $43B to
$44B range the past three years. Net interest income has
not fallen as rapidly as total interest income because
interest expenses have also been effected by the low rate
environment. In other words, while interest income has
been suppressed, interest expenses have lessened even
further, leading to a less steep fall in net interest income
relative to total interest income. Given that we expect at
least one 25 bps rate hike this year, and another three to
five over the next four years, we foresee net interest
income increasing at a five-year CAGR of 5.44%.
Interest income from loans is JPM’s biggest source of
revenue overall, typically representing 33% of gross
revenue. Interest income is the yield JPM earns on loans it
has made to consumers and commercial borrowers. We
calculate this yield via dividing a given year’s interest
income by the average loan volume for that year. But, JPM,
as every bank, adjusts its average interest earning assets,
accounts for tax distinctions among its securities, and
ultimately reports its interest income yields (and NIM, see
below) on a managed basis. While we would prefer to
calculate, and forecast, such measurements in a manner
consistent with JPM, we do not have enough information
to do so. In other words, we are unclear on JPM’s
methodology in this regard and are inclined to use a strictly
GAAP basis for our calculations. Thus, interest income and
interest margin related figures we discuss (and forecast)
will differ from what JPM reports in its annual filings. All
that said, JPM’s interest income yield, as we measure it,
has declined each of the past five years, falling to 4.23% in
2015. We expect this trend to turnaround, given the
anticipated normalization of rates, and we forecast loan
interest income yields in the 4.40% to 4.50% range from
2016-2020.
Net interest margin (NIM) is a key measure of profitability
for banks. It measures the spread a bank captures between
its borrowing costs and interest revenue. Generally, NIM is

calculated via dividing net interest income by average
interest earning assets. Again, we do this in a GAAP basis
and JPM does it on a managed basis. JPM’s interest
earning assets include: loans, securities, trading assets,
federal funds sold, securities borrowed, deposits with
other banks, and other assets. Post-financial crisis
monetary policy has squeezed NIM across the bank
industry. However, the Fed began normalizing rates in
2015, and we expect this process – albeit gradually and
cautiously – to continue at least through 2020. As
discussed above, interest rate moves tend to favor the
income side, relative to the borrowing side. Accordingly,
we expect JPM’s NIM to jump from 1.88% in 2014 and
2015, to 2% this year, and reach as high as 2.11% in 2019.
Source: JPM 10K; model projections
Balance Sheet Part I: Assets
As noted above, JPM has become the largest bank in the
US, in terms of assets, via a combination of acquisitions
and organic growth. As of 2Q FY2016, JPM stood at $2.47T
assets, however management has indicated that they
expect to end FY2016 closer to $2.45T.vi
From 2011-2015,
total assets grew at an average rate of 1.11% but that
figure is skewed by an 8.61% drop in 2015. Once adjusted
for that outlier, JPM’s assets grew at an average rate of
4.34%. Using management guidance as a starting point, we
expect JPM total assets to grow at an average rate of
4.58% from 2016-2020. Thus, we foresee JPM’s total
assets to reach $2.94T in 2020.
Loans represent JPM’s largest asset, averaging 31% of the
total balance sheet the past five years. This line item
includes wholesale, consumer, and credit card loans.
Trading assets, the portfolio of wide-ranging financial
instruments, is the next largest, at 17%. Securities, which
includes a combination of traditional and esoteric fixed-
income investments, makes up 14% of the balance sheet.
Items such as cash, deposits with banks, and federal funds
sold represent JPM’s cash and excess reserves that it holds
itself, with other banks, and/or with the Federal Reserve.
Combined such assets represent about a quarter, or 23%
of JPM’s balance sheet. Other includes net PP&E,
intangibles, accounts receivable, goodwill and other
assets.
Source: JPM 10K
As noted above, we believe more of JPM’s revenue will
come from traditional banking moving forward.
Accordingly, we project the balance sheet to reflect this
shift. More specifically, we expect the percentage of loans
to increase by 6.50% and trading assets and securities to
decrease by 3%.

Source: Model projections
This forecast is based on three factors: (1) regulatory costs
pertaining to complex assets; (2) recent trends in JPM’s
balance sheet; (3) loan growth expectations.
We believe the anticipated rise in regulatory costs for
investing in complex assets will cause JPM to trim such
holdings. For example, Title VII of Dodd Frank and the
European Market Infrastructure Regulation (EMIR), both
of which add clearing and reporting requirements to
certain over-the-counter (OTC) derivatives trades, are still
being implemented.vii
In other words, many OTC
derivatives that were historically traded bilaterally without
an exchange or data repository will now have to be cleared
and reported, increasing the costs of such trades.
Relatedly, Basel III, which increases capital costs for riskier
assets, continues to be phased-in and will contribute to a
regulatory environment that disfavors a large portion of
complex assets on the balance sheet.
Additionally, recent trends in JPM’s balance sheet further
support our future expectations. Trading assets and
securities, as percentages of total assets, have dipped
from 20% and 16% in 2011 to 15% and 12% in 2015,
respectively. Moreover, in 2015 loans jumped to 35% of
total assets, relative to 30% the preceding four years. Thus,
it seems that the shift toward traditional banking that we
are predicting is already underway.
Thirdly, we believe JPM will demonstrate continued loan
growth. Starting with 2016, based on performance
through 2Q and management guidance, we assume loan
growth of 7.5% for the year. From there we expect loans
to grow at an average rate of 6.50% through 2020.
Our assumptions regarding loan growth are based on a
host of economic variables. Such variables are discussed in
the Economic Outlook below.
It is also worth noting the credit quality of JPM’s loans.
JPM’s credit quality can be examined through two metrics:
(1) provision for credit losses (PCL) and (2) allowance for
loan losses (ALL). ALL is a balance sheet contra-account
that represents reserves JPM keeps for losses arising from
bad loans and PCL is an income statement expense that is
used to sustain the ALL.viii
In other words, each quarter
JPM takes a slice of its net income (PCL expense) and adds
that money to a sort of rainy day fund for loans that go bad
(ALL account).
PCL as a percentage of average gross loans outstanding
(PCL ratio), has averaged 0.35% in the more prudent post-
financial crisis era of 2011-2015. In 2016, this ratio is
expected to jump to 0.75% due to JPM’s oil and gas
exposure. JPM’s total oil and gas exposure currently
represents only 4.5% of total loans, and this increase in PCL
is seemingly driven by only a single name in the oil and gas
portfolio.ix
On the one hand, it is unclear whether the
worst is behind the oil and gas industry. On the other, JPM
seems to be managing its exposure to the oil and gas
industry carefully. Thus, we projected an average PCL ratio
of 0.45% through 2020 – not as low as the 2011-2015
average but not as high as the 2016 spike either.
Similarly, ALL as a percentage of gross loans outstanding
(ALL ratio), which built up during the financial crisis has
been decreasing ever since. It dropped from 5% in 2009 to
1.62% in 2015. But, again due to oil and gas industry
strains, the ALL ratio is on pace to rise to 1.75% for 2016.
Beyond that, we expect the ALL ratio to average a slightly
higher 1.87% through 2020. This higher figure is due to our

forecasted PCL ratio, discussed above. In other words, as
we expect JPM to record slightly higher PCL expenses, the
ALL reserve will increase too.
Balance Sheet Part II: Liabilities and Equity
As a bank, JPM primarily finances its assets through
various forms of borrowing. More specifically, deposits,
short-term debt (i.e., commercial paper, federal funds
purchased, accounts payable, etc.), and long-term debt
(i.e., FHLB advances, bonds, etc.). Among these sources,
the breakdown, as a percentage of total assets, tends to
be 54%, 17%, and 12% respectively. Given the historical
stability of JPM’s borrowing composition, we kept
essentially the same breakdown for our forecasts.
Since JPM can only invest and lend out what it can bring in,
its asset growth must be in line with its funding growth.
Accordingly, as deposits represent much of JPM’s funding,
we anticipate a 4.76% five-year deposits CAGR. We
projected the remaining borrowing sources as a
percentage of beginning total liabilities, as there were
consistent historical patterns in that regard. For example,
long-term debt as a percentage of beginning liabilities has
been right around 12% each of the past five years, thus we
forecasted it in the 12-13% range going forward.
There is one other liability item that does not represent a
funding source: trading liabilities, which tends to
represent 6.50% of beginning liabilities. This is essentially
the opposite side of the trading assets account discussed
above. Given the complexities associated with this
account, and the consistency in its historical proportion,
we kept it at 7% of beginning liabilities through 2020.
While borrowing, in large part, dictates how much JPM can
lend and invest, there is another controlling factor:
regulation. As a bank holding company, JPM is governed
by the Federal Reserve, and in turn the Basel Accords.
While Basel is a set of international guidelines, the Fed has
decided to use Basel, along with Dodd-Frank, to establish
capital requirements for US banks within its jurisdiction.
Capital requirements mean that JPM must finance its
assets with a minimum level of equity. Additionally, as a
designated Global Systemically Important Financial
Institutions (G-SIFI), JPM must use even more equity
financing than most banks.
The amount of equity financing necessary hinges on the
type of residual claim such equity represents. There are
various categories such as Common Equity Tier 1 (CET1),
Tier 1, Tier 2, Total Capital, etc. Each category is the
numerator for the various capital ratios JPM is required to
meet. The denominator consists of the assets being
financed. And the ratio required depends on the asset’s
perceived riskiness. Accordingly, JPM must assign a risk-
weight to each of its assets, known as RWAs (i.e., CET1
ratio = CET1/RWA). Because RWAs are measured
internally, and are not disclosed to the public, we have no
way of estimating or projecting JPM’s RWA capital ratios.
However, all is not lost in forecasting JPM’s capitalization
as there is one Basel capital ratio we can approximate.
Specifically, the Tier 1 leverage ratio uses Tier 1 Capital as
the numerator and does not have a risk-weighted
denominator. Tier 1 Capital can be estimated by adding
common stock and preferred stock, then subtracting
goodwill and other intangibles. There are other
adjustments that are not defined in JPM’s 10K, but such
changes are not large enough to prevent us from making a
decent estimation. To be considered well-capitalized JPM
must maintain a Tier 1 leverage ratio of 6%.x
JPM has been
above that threshold each of the past five years, and even
surpassed 8% in 2015. We expect JPM’s Tier 1 leverage
ratio to continue its upward trajectory and approach
9.50% by 2020.
This expectation makes sense, as Basel III continues to be
phased in JPM will need use higher levels of equity to
finance its operations. What this means for JPM’s
profitability going forward is less clear. While more equity
will undoubtedly provide a nice cushion in case of a
financial downturn, it also poses potential investment
issues. Specifically, as JPM’s equity base grows, so does its
return on equity (ROE) denominator. And if net income,
the ROE numerator, does not outpace this growth, then
JPM’s ROE will start to decrease and potentially be unable

to exceed its cost of equity. In fact, by 2020, we forecast
an ROE of 8.54% relative to a cost of equity of 8.58%. This
is certainly concerning from our perspective and
something we must consider in our evaluation of JPM
stock.
Balance Sheet Part III: Accounting Labyrinth
JPM records 27% (or $625B) of its assets at fair value. Fair
value is the price an asset could fetch in its market at the
date of its valuation. There are three levels of fair value:
Level One - quoted prices exist for identical
assets/liabilities in active markets (i.e., shares traded on a
public exchange); Level Two – quoted prices exist for
similar assets/liabilities in active markets and model inputs
are observable either directly or indirectly; Level Three –
one or more inputs are unobservable and significant to the
valuation.xi
Level Two would involve complex modeling
using available and relevant data, and could be considered
analogous to an educated guess. Level Three, which, by
definition, estimates items that cannot be observed,
would involve even more complex modeling with
unavailable data, and could be described as an uneducated
guess.xii
In fact, Level Three assets, even in a stable market,
can be off by as much as 15% - and likely much more in a
panic market.xiii
As of FY2015, JPM had $180B in Level One assets, $415B in
Level Two, and $31B in Level Three.
Source: JPM 10K
However, from 2014 to 2015 $18B in Level Three assets
were moved to Level Two due to increases in observability
in certain inputs and decreases in significance in other
unobservable inputs.xiv
In other words, JPM cut its Level
Three assets by 40% based on its view of how observable
an input was and/or how significant it judged another
input to be. If assets can be moved back and forth between
Levels Two and Three so seemingly effortlessly, the line
separating educated and uneducated guess becomes
blurrier – and the associated value(s) less reliable.
Moreover, JPM records $60B and $9B in Level Two and
Level Three liabilities, respectively. However, that is after
netting out $890B in derivatives obligations. While netting
money owed against offsetting money to be received
under derivatives contracts is commonplace under GAAP,
and on some level makes economic sense, it does not
mean the net exposure is the true exposure. Put
differently, if things go haywire – such as several countries
leaving the EU, an unexpected sovereign/large corporate
default, or large foreign exchange rate swing – then the
amount a party owes under a derivatives contract could
drastically exceed the net obligation. In short, if everything
goes as expected JPM only owes $70B in derivatives
payable, but if not, JPM could potentially be on the hook
for much more. Scarily, if JPM had to pay out even 25% of
its notional derivatives liability, that could be enough to
wipe out JPM’s SH equity entirely.
Beyond the uncertainties with fair value and derivatives
exposure, as of FY2015 JPM had another $940B in off-
balance sheet (OBS) exposure. This would mean that JPM’s
true size is closer to $3.3T. Additionally, this would mean
JPM is far more levered than the on-balance sheet
leverage ratios would suggest. Basel III contemplated this
exact scenario, and came up with the supplementary
leverage ratio (SLR) to adjust for OBS exposures. The SLR is
essentially Tier 1 capital divided by average total assets
and OBS exposures. Beginning in 2018, JPM will be
required to maintain a 5% SLR. As of FY15, JPM estimates
its SLR to be 6.5%, which is above the minimum but still a
low figure. It is unlikely that many shareholders would
want their equity investment levered upwards of 15x.
Also, JPM excludes obligations under structured notes that
are based on the performance of such notes from its total
exposures. In other words, based on the current
performance of the note, JPM estimates that it does not
owe anything. However, it does not discuss what it may
owe if that performance changes or turns against JPM. The
reason for this could be that JPM views the obligations as
relatively small in isolation, but it is plausible that they add
up in the aggregate.
Even the brightest person or the most powerful
supercomputer cannot perfectly evaluate the intricate
web of uncertainty embedded in JPM’s complex

transactions. At some point, especially when using
unobservable inputs, the upper limits of human cognition
and computer processing can only stretch so far. Thus, we
are unsure how confident we can be in the value of JPM’s
assets and what its total exposure to losses truly is –
especially in a turbulent market.
COMPANY EARNINGS
Recent Performance
Over the past year, JPM has displayed a strong earnings
performance. Specifically, FY2015 EPS, on both a basic and
diluted basis, grew by 13.4% relative to FY2014, beating
analysts’ estimates of diluted EPS by 2%.xv
Moreover, JPM
has surpassed analysts’ expectations in each of the past six
quarters – most recently posting a 13-cent surprise ($1.55
vs. $1.42) in Q2 of 2016.
Source: FactSet
We should note that JPM’s management does not guide
EPS per se, but it does give guidance for net interest
income, non-interest revenue, and total assets.
Additionally, while FY2015 was strong and the first half of
2016 has exceeded expectations, JPM’s FY2016 EPS is
expected to decline on year-over-year (YOY) basis. More
specifically, we expect FY2016 basic EPS to be $5.93
relative to $6.05 and analysts foresee diluted EPS declining
from $6.00 to $5.63.
Moving forward, we project basic EPS to grow at a 5.2%
CAGR from 2016-2020, relative to the 7.7% pace from
2011-2015. While this may seem pessimistic, our net
income forecasts are $1B higher than analysts’ estimates
for 2016 and 2017. Most of this relatively small difference
comes from lower tax expenses and higher net interest
income eon our end. In other words, analysts use a slightly
higher marginal tax rate than we do and we expect a
moderately friendlier rate environment. Unfortunately,
analysts only predict diluted EPS and our model forecasts
basic EPS, thus we are unable to make an apples-to-apples
comparison here.
Overall, JPM’s earnings the past six quarters have been
impressive, and while we all expect a slight dip for 2016,
we believe JPM will rebound in 2017 at a solid 5% pace
through 2020.
INDUSTRY THEMES
JPM is part of the Financials Sector, and the Diversified
Banks sub-industry. Diversified Banks is made up of the six
largest US banks and the five largest Canadian banks, by
asset size. The US Diversified Banks include JPM, Bank of
America, Citigroup, Wells Fargo, US Bancorp, and PNC
Financial Services.
Risky Business?
Since the financial crisis, a host of new regulations have
been introduced with the intent of making the banking
industry safer. The most significant reforms include Dodd-
Frank and Basel III, both of which were discussed earlier
(see Balance Sheet Part I and Part II, under Company
Description). The goal of these regulations is to reduce the
riskiness in the industry that exacerbated the financial
crisis.
It would seem then, as banks become better capitalized
and risky activities increase in cost, that the overall
industry is safer relative to the pre-crisis era. However,
recent data indicates that this may not be the case. In fact,
the opposite may be occurring and banks may be riskier
now than before the crisis. Specifically, risk measures
including various volatility metrics, credit default swap
(CDS) spreads, systemic risk percentage (SRISK), etc. all
paint an uneasy picture about the safety of today’s large
banks.xvi
Source: Sarin and Summers
Bank Risk - Before and After Financial Crisis
Measure Pre-Crisis Avg. Post-Crisis Avg. 2015 Avg.
Volatility 24.70 33.07 20.67
Bank volatility/market volatility 1.55 1.80 1.71
Implied volatility 22.90 30.84 22.96
Implied bank volatility/market volatility 1.91 2.13 1.61
Option delta 0.036 0.074 0.046
Beta 1.18 1.59 1.23
CDS spread 31.85 139.04 93.58
Preferred stock price 24.91 20.15 20.74
SRISK% 5.76 10.44 10.18

The metrics in the above table pertain to four of the six
Diversified Banks: JPM, Wells Fargo, Bank of America, and
Citi, as well as two other financial conglomerates:
Goldman Sachs and Morgan Stanley. For every measure in
the table, other than preferred stock, a higher number
means more risk. As for preferred stock, because of its
debt-like features, a lower yield and higher price would
suggest less risk.xvii
Especially in the post-crisis low rate
environment, a less risky bank should have more
expensive preferred shares than before the crisis.
Unfortunately, the opposite has occurred.
Moreover, both historical and implied volatility, even
when adjusted for the broader market, are higher since
the crisis – although 2015 did show a slight downtick.
Given that it was created in 2016, SRISK may jump out as a
novel concept. Essentially, it attempts to define risk by the
likely size of a firm’s contribution to a system-wide
failure.xviii
It contains three inputs: (1) real social cost of a
crisis per dollar of capital shortage; (2) probability of a
crisis; and (3) expected capital shortfall of the firm in such
crisis.xix
In short, SRISK is the capital a firm would need to
survive a financial crisis similar to that of 2008-2009. Thus,
it appears that the six banks delineated above, on, need
more capital to withstand a crisis today than they did in
2008-2009 – meaning they pose a riskier investment.
The conventional wisdom after the crisis was that
investors in bank shares would sacrifice profitability in
favor of reduced risk. However, an investment with lower
profit and higher risk is much less appealing. In light of this,
it will be interesting to see how the industry evolves going
forward.
MARKETS AND COMPETITION
As a large conglomerate, JPM competes with a wide range
of financial institutions. Most directly, it competes with
the other five Diversified Banks in the US mentioned
above. JPM also competes with large investment banks
such as Goldman Sachs, Morgan Stanley, etc., and
European counterparts Barclays, UBS, etc. Lastly, JPM
competes with asset managers such as BlackRock and
Vanguard.
The six Diversified Banks dominate the $705B US
commercial banking market, earning 50% of all FDIC-
insured bank revenue.xx
JPM alone accounts for 13.5% of
such revenue. This indicates a high level of concentration
in the banking industry, with JPM leading the way.
Another way to examine the bank industry is through
share of deposits. There are currently 6,122 FDIC-insured
banks in the US, but the six Diversified Banks hold 41% of
all domestic deposits. This further illustrates the
concentration in the banking world. And again, JPM ranks
quite well here, less than 1% away from the top spot.
Source: Card Hub; FDIC
Given the high level of concentration and the relative
commoditization of commercial banking products, banks
must compete on price in this space. Accordingly, we
project a decrease in JPM’s lending and deposit related
fees line item at 1.05% a year through 2020.
The above data all relates to the traditional operations of
JPM. To understand its market position within the
investment banking realm, we examine fee revenue. This
makes sense because investment banking is almost
entirely a fee driven business. The investment banking
industry is also highly concentrated as the top five firms
earned 30% of the $89B in 2015 investment banking
fees.xxi
These five firms include three Diversified Banks
(JPM, Bank of America, Citi) and two investment banks
(Goldman Sachs and Morgan Stanley).

Source: Financial Times; Thomson Reuters
As seems to be the pattern, JPM shows up at the top in this
market as well. However, this stream of money is declining
for JPM and the industry overall. More specifically, global
investment banking revenue fell 6% in 2015 and is down
21% YOY through 2Q 2016. In other words, the pie for an
already competitive industry is shrinking, which will lead
to further price competition moving forward. Hence, the
fee compression we embedded in our model – in
particular, we do not expect JPM to reach its 2015 level in
investment banking fees again until 2020.
In terms of asset management, this is an area JPM is not at
or very near the top. Asset management is a $16T market
of firms that manage various pools of capital.xxii
It is a
service based business model that hinges on fee pricing
and performance results. Whereas an investment banker
is paid a fee for closing a deal, an asset manager will collect
a fee to manage the assets and may also collect additional
compensation based on performance.
Source: S&P Capital
As can be seen from the table above, JPM ranks sixth in
AUM among asset managers – respectable but certainly
there is room for improvement. Also, the story of
concentration among financial activities applies here as
well: BlackRock, Vanguard, and State Street manage 61%
of all the assets in this market. However, while price
competition is fierce, firms also try to compete on product
differentiation here. In other words, firms attempt to offer
superior strategies and unique products at a lower price.
For example, new ETFs that use more institutional
strategies (i.e., long/short equity) but are available to retail
investors. Our expectations regarding JPM’s asset
management division have been outlined in earlier
sections.
Peer Comparisons
We limited JPM’s peer group as other firms that offer
similar products and services along the banking spectrum.
For example, asset managers were not included because
they are more limited in scope but investment banks such
as Goldman Sachs and Morgan Stanley were because they
compete with JPM across various areas. Thus, this peer
group includes the other five US Diversified Banks – Bank
of America (BAC), Citi (C), US Bank (USB), and Wells Fargo
(WFC) – along with Goldman Sachs (GS) and Morgan
Stanley (MS).

Source: FactSet; Yahoo! Finance
The above table paints a mixed picture about JPM’s
performance relative to its peers. For example, using
standard bank profitability measures, ROA, ROE, and NIM,
JPM is more profitable than some peers but less profitable
than others. Additionally, using PCL and ALL ratios as a
benchmark, JPM is a more prudent lender than some of its
competitors but less prudent than others. It is noteworthy
that JPM is by far the most levered Diversified Bank – 23%
more levered than the next closest, BAC. Being the largest
bank and the most levered is a combination that is unlikely
to appeal to investors and regulators alike due to the risk
and regulatory implications discussed previously (see
Industry Trends).
The market seems to be telling an interesting Price-to-
Book (P/B) story. On the one hand, USB and WFC are
trading at decent premiums relative to their book value.
On the other, BAC, C, GS, and MS are all trading at
discounts relative to their book value. JPM and PNC are
right in between and are trading at slightly above book
value. For the banks trading at a discount, this indicates
that the market is not confident in the prospects of their
stocks. It is typically not a good sign when the market
values a company’s equity below its book value. Some of
this market view may stem from uncertainty regarding
these banks’ accounting, apprehension about their ability
to generate a ROE that exceeds cost of equity, and
discomfort with their post-crisis risk profile. What this
means for JPM is unclear – given its P/B ratio, the market
seems somewhat secure in JPM’s performance, but not
enough to attach a solid premium to its equity value.
ECONOMIC OUTLOOK
Bank performance largely hinges the state of the overall
economy. For JPM, with a 75%/25% US/international
breakdown for both revenues and assets, the US economy
is the most important and the global economy is
secondary. Key variables such as interest rates, GDP,
consumer confidence, housing, commercial real estate,
the labor market, all fuel lending – JPM’s bread and butter.
Therefore, this section will focus on such metrics,
domestically, with some consideration of global factors.
Rates
The Federal Reserve raised rates for the first time since the
financial crisis last December. In our September Economic
Outlook, we forecasted another 25 bps rate hike this year
and another two to three 25 bps rate hikes through 2018.
From there, we could see anywhere from zero to two more
25 bps rate hikes through 2020. These expectations are
based on the Fed’s cautious tone, and indications that rate
normalization will be a slow and steady process. However,
we should note that the Bank of Japan and the European
Central Bank continue to ease their monetary policy, with
Japan even veering into negative rate territory. Thus,
despite our domestic rates rising, there could be a spillover
effect from abroad that negatively impacts JPM’s loan
yields. Since 90% of JPM’s loan portfolio is domestic we do
not expect this to directly impact JPM’s interest income
and margins, but the potential for indirect impact is
something we will watch closely. Overall though, we
expect the future rate environment to be favorable for
JPM’s business as discussed throughout the Company
Description.
GDP
On the most macro-level, economists expect real US GDP
and real global GDP to grow at approximately 2%-2.50%
and 3%-3.50%, respectively over the next three years.xxiii
We foresee similar growth domestically, as our September
Economic Outlook produced a median two-year real US
GDP of 2.3%. In other words, the post-crisis status quo of
sluggish growth is likely to endure. Such expectations
support our case for very gradual and modest rate hikes,
and in turn, the moderate increases in JPM’s interest
income and margins.
JPM BAC C PNC USB WFC GS MS
CurrentMarketCap $238B $158B $135B $44B $73B $229B $67B $60B
FY15Assets $2.47T $2.14T $1.84T $359B $422B $1.79T $861B $789B
FY15Loans $837B $903B $618B $207B $261B $917B $46B $73B
FY15PCL (as%ofloans) 0.46% 0.33% 1.10% 0.12% 0.43% 0.27% N/A 0.12%
FY15ALL (as%ofloans) 1.55% 1.33% 2.10% 1.32% 1.48% 1.26% 0.90% 0.31%
FY15ROE 9.73% 6.36% 7.90% 9.16% 13.07% 12.13% 7.18% 8.40%
FY15Debt:Equity 2.10x 1.71x 1.66x 1.22x 1.30x 1.54x 3.84x 2.95x
FY15ROA 0.85% 0.74% 0.95% 1.15% 1.41% 1.31% 0.71% 0.77%
FY15Managed-BasisNIM 2.35% 2.20% 2.93% 2.74% 3.00% 2.95% 0.40% 0.40%
P/B(mrq) 1.05 0.65 0.63 1.05 1.75 1.28 0.94 0.87

Consumer Confidence
A more confident consumer is a more willing borrower,
and thus better for JPM’s business. In August, consumer
confidence in the US reached an 11-month high, as the
index hit 101.1.xxiv
Additionally, global consumer
confidence, as measured by Nielsen, is also trending
positive.xxv
Specifically, it was at 98 for Q2 2016, up two
points YOY. We expect these trends to continue as GDP
remains positive (see above) and the labor market
strengthens even further (see below). Consumer loans and
credit cards make up 57% of JPM’s loan portfolio. Thus, we
foresee a consumer better positioned to borrow over the
next four years, contributing to JPM’s loan growth
highlighted in the Company Description.
Labor Market
This summer the US unemployment rate fell below 5% for
the first time since before the Great Recession. Our two-
year forecast produced a median unemployment rate of
4.8%. In other words, the US labor market has rebounded
well from the crisis and we expect that to continue. In fact,
the labor market hast tightened so much in the past year
or so, that it is starting to flow through to wages and
income. In fact, median household income grew 5.2% YOY
in 2015, the largest jump since 2007.xxvi
This is crucial for
consumer confidence, and in turn bank lending, because
as people start to earn more money they will be more
confident, and more likely to spend and borrow more.
In terms of global unemployment, it stood at 5.8% for
2015, down from 6.2% in 2009.xxvii
xxviii
However, while the rate
is expected to stay steady, the number of unemployed
people globally is expected to rise, at least through
2017. In short, the global labor market picture is
murkier than the US, but since JPM’s loans are so
domestically concentrated we expect the optimistic US
labor market outlook to outweigh the murky global one.
Real Estate
Commercial and residential real estate loans represent
36% of JPM’s loan portfolio. Accordingly, forecasted US
housing starts and US commercial property starts are the
main variables for predicting the domestic real estate
lending environment for JPM. Housing starts are expected
to increase at a three-year CAGR of 9.1% through
2018.xxix
Additionally, commercial real estate
establishments are projected to grow at a five-year CAGR
of 1.50% through 2020.xxx
There are no analogous
forecasts for international real estate, although through
3Q 2015 global direct property investment was up 11%
YOY.xxxi
This suggests that the international real estate
market is also trending up. All of this data indicates a
strong real estate lending market, and as such supports
our loan growth expectations for JPM.
In sum, solid to strong economic fundamentals will
continue through our forecast period. This economic view
contributes to our belief that JPM will grow at a reasonable
pace. Specifically, our model grows JPM’s assets at a 4.58%
CAGR, slightly higher than the historical 4.34%.
VALUATION
JPM currently trades at a market price of $65.82, and our
models (all dated 9/2/2016) produce a range of values
from $69.51 to $75.01. In considering these models
collectively, we assign a $70 price target for JPM,
indicating 6% in upside potential. Hence, our HOLD
recommendation.
Projections already covered: Our predictions and
underlying reasoning for all key balance sheet and income
statement items have been explained at length
throughout this report, namely in the Company
Description and Economic Outlook. Also, any line items not
discussed are too minor to warrant attention. Thus, we will
not expound on any additional projections here.
Risk premium: The Henry Fund consensus is 5%.
Beta: We used a Beta of 1.26 because this was the median
of the weekly Betas over the last 10 years, as calculated by
Bloomberg.
CV growth: We believe long-term nominal US GDP will be
about 3.50%-4.00% and nominal global GDP about 5.00%-
5.50%. Thus, we set JPM’s CV growth rate at 3% since we
do not expect it to outgrow the US nor the global
economy. Considering US and global nominal GDP is
appropriate here because JPM has both domestic and
international operations.
Free Cash Flow to Equity and Equity Economic Profit:
These models account for the fact that banks make money
off both sides of the balance sheet. The formal approach
(Formal FCFE), focuses on uses and sources of cash. The
simple approach focuses on the total change in assets and
liabilities and equity economic profit focuses on the

relationship between ROE and cost of equity – since both
approaches produce the same exact price we refer to
them collectively as Simple FCFE/EEP. The Formal FCFE
produces a price of $73.32 and the Simple FCFE/EEP
produces a price of $69.66. The difference between the
two prices appears to be driven by the fact that Formal
FCFE adds back the PCL expense, increasing its projected
cash flows relative to the Simple FCFE/EEP.
DDM: The DDM produced a price of $69.51, about the
same as the Simple FCFE/EEP number and about 5% lower
than Formal FCFE. This likely stems from slightly higher
Formal FCFE growth projections relative to dividend
growth projections. We do expect JPM to increase its
dividend payout ratio moving forward. Specifically, the
payout ratio has averaged 30% the past three years and
we expect it to approach 35% by 2020. Our reasoning is
that as JPM becomes better capitalized and generates
more cash it will look to distribute it to its shareholders
accordingly.
Relative valuation: As a bank, price-to-book (P/B) is the
most appropriate relative valuation model here. Relative
P/B (BV16) produces a price of $75.01, the highest of all
our models. However, this number is skewed a bit high by
two outliers. Specifically, Wells Fargo and US Bank have
2016 P/B ratios of 1.40 and 1.80. respectively. This is .40-
.80 higher than the next closest P/B ratio. If these two
banks are removed from the average, the Relative P/B
(BV16) produces a price of $58.98 – quite the difference.
Thus, we view $75.01 to be an optimistically tilted price.
The peer group used to arrive at the P/B multiple and our
interpretation of both industry and JPM P/B was discussed
in the Markets and Competition section above.
Model evaluation: We considered all the models in
determining our target price. As noted above, the relative
valuation was skewed a bit too high at $73, the DDM and
Simple FCFE/EEP produced essentially the same price at
$70, and the Formal FCFE gives a $73 value. Thus, a
reasonable range for JPM’s intrinsic value is likely $69-$74.
We steered toward the lower end of that range to arrive
at our target price of $70.00. This is because, while we like
the outlook of economic fundamentals and JPM’s growth
prospects, we are uncomfortable with the volume of Level
Two and Three assets/liabilities, the OBS exposure, and
JPM’s ROE struggling to exceed its cost of capital.
Sensitivity analysis: We tested the Simple FCFE/EEP price
against several variables, including beta, risk premium,
yields, tax rate, growth rates, etc. In the vast majority of
scenarios, the target price exceeds the current market
price. However, the model does seem to be quite sensitive
to JPM’s beta and the risk-free rate. For example, a beta of
1.39 and a risk-free rate of 2.50% changes the price to $59
– about 16% below our target price and 11% below the
current market price. Such a scenario is quite plausible
since JPM’s 10-year weekly beta was as high as 1.59 and
the 30-year UST surpassed 2.50% every day for the first
five months of this year. Beta is the bigger driver here the
as difference between the highest and lowest numbers
tested produces upwards of a $45 range, holding risk-free
rate constant. Risk-free rate on the other hand only
changes by $23 at most, holding beta constant. This tells
us that while our model is fairly robust, JPM’s value is very
sensitive to volatility.
Henry Fund vs. other analysts: Our EPS and net income
projections relative to analyst estimates was analyzed in
the Recent Development sections. The mean one-year
target price among analysts is $70.56 – almost exactly the
same as our current target price. It is likely that both us
and the sell-side analysts are viewing JPM’s story similarly:
solid growth prospects but risk concerns too.
REASONS TO SELL
• The $515B in complex Level Two and Three assets
and liabilities, and/or the $940 in OBS exposure
become a material risk to JPM’s capitalization.
• JPM’s average ROE over the past five years of
9.16% barely surpasses its 8.58% cost of equity,
further downward pressure in this regard could
make JPM an unattractive investment
• The expected post-crisis trade-off of less profit for
less risk, may actually have been less profit for
more risk given increases in JPM’s CDS spreads (up
80 bps), implied volatility (up 20%), and beta (up
.10). If this trend continues, JPM may be too risky
to hold.
• JPM’s current P/B of 1.05 indicates that the
market views JPM’s equity as just above its book
value, and perhaps a lack of confidence regarding
JPM’s prospects.
Ultimately, we are optimistic about the overall economy
and its effect on JPM’s business. And while we believe JPM
should provide 6% upside, we have concerns about its risk
profile and its ability to generate an ROE that exceeds cost
of equity. Thus, we recommend a HOLD.

REFERENCES
i
JPMorgan 10K, February 2016
ii
Cox, Jeff. Biggest banks in the world list: China dominates, US
Fades, CNBC, May 2016,
http://www.cnbc.com/2016/05/25/biggest-banks-in-the-
world-list-china-dominates-us-fades.html
iii
Sorkin, Andrew Ross and McGeehan, Patrick. Chase
Manhattan to Acquire J.P. Morgan for $30.9 Billion, New York
Times, September 2000,
http://www.nytimes.com/learning/teachers/featured_articles/
20000914thursday.html
iv
CNN Money, Deals, $58B bank deal set, January 2004,
http://money.cnn.com/2004/01/14/news/deals/jpmorgan_ban
kone/
v
Reuters, JPMorgan gets wholly-owned asset management
license in China, September 2016,
http://www.reuters.com/article/us-jpmorgan-china-
idUSKCN11750O
vi
JPMorgan 10Q, August 2016
vii
Cornell University, Dodd-Frank: Title VII at
https://www.law.cornell.edu/wex/dodd-frank_title_VII;
European Commission, Derivatives/EMIR at
http://ec.europa.eu/finance/financial-
markets/derivatives/index_en.htm
viii
Net Advantage, S&P Capital Industry Surveys, Banks, July 2016
ix
JPM 10Q, see vi
x
JPM 10K, see i
xi
JPM 10K, see i
xii
Partnoy, Frank and Eisinger, Jesse. What’s Inside America’s
Banks?, The Atlantic, February 2013,
http://www.theatlantic.com/magazine/archive/2013/01/whats
-inside-americas-banks/309196/
xiii
Partnoy and Eisinger, see xii
xiv
JPM 10K, see i
xv
FactSet, JPM-US, Surprise History, September 2016
xvi
Sarin, Natasha and Summers, Lawrence. Have big banks
gotten safer?, Brookings, September 2016,
https://www.brookings.edu/wp-
content/uploads/2016/09/2_sarinsummers.pdf
xvii
Sarin and Summers, see xx
xviii
xix
xx
S&P Capital, see viii
xxi
Financial Times, Investment Banking League Tables, June
2016,
http://markets.ft.com/investmentBanking/tablesAndTrends.as
p
xxii
Net Advantage, S&P Capital Industry Surveys, Capital Markets,
March 2016
xxiii
FactSet, Economics, US, Estimates, Country Summary,
September 2016; Statista, IMF
https://www.statista.com/statistics/273951/growth-of-the-
global-gross-domestic-product-gdp/
xxiv
Schaller, Charles and King, Wallace. Henry Fund Economic
Outlook – September 2016, KnightHawk: The Blog, September
2016, http://www.biz.uiowa.edu/knighthawk/
xxv
Nielsen, Q2 2016 Consumer Confidence Report, August
2016,
http://www.nielsen.com/us/en/insights/reports/2016/q2-
2016-consumer-confidence-report.html
xxvi
Mutikani, Lucia and Heavey, Susan. U.S. household income
posts record surge in 2015, poverty falls, Reuters, September
2016, http://www.reuters.com/article/us-usa-economy-
poverty-idUSKCN11J1PP?il=0
xxvii
International Labour Organization, World Employment and
Social Outlook – Trends 2016, January 2016,
http://www.ilo.org/global/research/global-
reports/weso/2016/lang--en/index.htm
xxviii
ILO, see xxxvii
xxix
FactSet, see xxxiii
xxx
IBISWorld, US Commercial Real Estate Key Statistics
xxxi
Rapoza, Kenneth. Why The Best Investment In 2016 Might
Be Global Real Estate, Forbes, January 2016,
http://www.forbes.com/sites/kenrapoza/2016/01/05/why-the-
best-investment-in-2016-might-be-global-real-
estate/#37bd82e4109e

IMPORTANT DISCLAIMER
Henry Fund reports are created by student enrolled in the
Applied Securities Management (Henry Fund) program at
the University of Iowa’s Tippie School of Management.
These reports are intended to provide potential employers
and other interested parties an example of the analytical
skills, investment knowledge, and communication abilities
of Henry Fund students. Henry Fund analysts are not
registered investment advisors, brokers or officially
licensed financial professionals. The investment opinion
contained in this report does not represent an offer or
solicitation to buy or sell any of the aforementioned
securities. Unless otherwise noted, facts and figures
included in this report are from publicly available sources.
This report is not a complete compilation of data, and its
accuracy is not guaranteed. From time to time, the
University of Iowa, its faculty, staff, students, or the Henry
Fund may hold a financial interest in the companies
mentioned in this report.

JP Morgan
Revenue Decomposition (in thousands)
Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E (CV)
Non‐Interest Revenue
Underwriting 5,036 4,911 4,640 4,000 4,120 4,244 4,371 4,502
YOY growth 16.68% ‐2.48% ‐5.52% ‐13.79% 3.00% 3.00% 3.00% 3.00%
Advisory 1,318 1,631 2,111 2,000 2,080 2,163 2,250 2,340
YOY growth ‐11.66% 23.75% 29.43% ‐5.26% 4.00% 4.00% 4.00% 4.00%
Investment banking fees 6,354 6,542 6,751 6,000 6,200 6,407 6,621 6,842
YOY growth 9.40% 2.96% 3.19% ‐11.12% 3.33% 3.34% 3.34% 3.34%
Principal transactions 10,141 10,531 10,408 11,000 11,550 12,128 12,734 13,371
YOY growth 83.18% 3.85% ‐1.17% 5.69% 5.00% 5.00% 5.00% 5.00%
Lending & deposit‐related fees 5,945 5,801 5,694 5,612 5,556 5,500 5,445 5,400
YOY growth ‐4.05% ‐2.42% ‐1.84% ‐1.44% ‐1.00% ‐1.00% ‐1.00% ‐0.83%
Asset management fees 8,549 9,646 9,755 9,700 10,045 10,335 10,626 11,023
YOY growth 20.39% 12.83% 1.13% ‐0.56% 3.56% 2.89% 2.81% 3.74%
Administration fees 2,101 2,179 2,015 1,800 1,782 1,764 1,747 1,729
YOY growth ‐1.59% 3.71% ‐7.53% ‐10.67% ‐1.00% ‐1.00% ‐1.00% ‐1.00%
Brokerage commissions 2,321 2,270 2,304 2,100 2,079 2,058 2,038 2,025
YOY growth ‐0.43% ‐2.20% 1.50% ‐8.85% ‐1.00% ‐1.00% ‐1.00% ‐0.62%
All other commissions & fees 2,135 1,836 1,435 1,400 1,386 1,372 1,358 1,350
YOY growth ‐7.21% ‐14.00% ‐21.84% ‐2.44% ‐1.00% ‐1.00% ‐1.00% ‐0.62%
Total commissions & fees 4,456 4,106 3,739 3,500 3,465 3,430 3,396 3,375
YOY growth ‐3.80% ‐7.85% ‐8.94% ‐6.39% ‐1.00% ‐1.00% ‐1.00% ‐0.62%
Asset management, administration & commissions 15,106 15,931 15,509 15,000 15,292 15,530 15,769 16,127
YOY growth 8.93% 5.46% ‐2.65% ‐3.28% 1.95% 1.56% 1.54% 2.27%
Securities gains (losses) 667 77 202 200 200 200 200 200
YOY growth ‐68.39% ‐88.46% 162.34% ‐0.99% 0.00% 0.00% 0.00% 0.00%
Mortgage fees & related income 5,205 3,563 2,513 2,750 2,846 2,946 3,049 3,156
YOY growth ‐40.08% ‐31.55% ‐29.47% 9.43% 3.50% 3.50% 3.50% 3.50%
Card income 6,022 6,020 5,924 6,000 5,970 5,940 5,910 5,900
YOY growth 6.43% ‐0.03% ‐1.59% 1.28% ‐0.50% ‐0.50% ‐0.50% ‐0.18%
Other income 3,847 2,106 3,032 4,000 4,000 4,000 4,000 4,000
YOY growth ‐9.65% ‐45.26% 43.97% 31.93% 0.00% 0.00% 0.00% 0.00%
Total non‐interest revenue 53,287 50,571 50,033 50,562 51,614 52,651 53,728 54,995
YOY growth 2.24% ‐5.10% ‐1.06% 1.06% 2.08% 2.01% 2.05% 2.36%
Avg. earning assets (US GAAP beg. + ending/2)
Loans (net of allowance for loan losses) 717,007 732,653 783,448 854,044 919,719 988,000 1,050,985 1,107,508
YOY growth 1.85% 2.18% 6.93% 9.01% 7.69% 7.42% 6.37% 5.38%
Securities 362,578 351,004 319,416 286,515 282,312 289,155 299,611 306,667
YOY growth ‐1.47% ‐3.19% ‐9.00% ‐10.30% ‐1.47% 2.42% 3.62% 2.36%
Trading assets 412,346 386,826 371,414 348,297 360,564 370,726 378,650 390,794
YOY growth ‐7.75% ‐6.19% ‐3.98% ‐6.22% 3.52% 2.82% 2.14% 3.21%
Federal Funds sold and securities purchased under resale 272,206 231,960 214,189 217,993 228,357 238,867 250,289 261,938
YOY growth 2.41% ‐14.79% ‐7.66% 1.78% 4.75% 4.60% 4.78% 4.65%
Securities borrowed 115,241 110,950 104,578 102,274 105,100 106,862 111,971 117,183
YOY growth ‐11.85% ‐3.72% ‐5.74% ‐2.20% 2.76% 1.68% 4.78% 4.65%
Deposits with other banks 218,933 400,264 412,246 337,566 339,466 352,015 368,847 386,014
YOY growth 111.43% 82.83% 2.99% ‐18.12% 0.56% 3.70% 4.78% 4.65%
Other assets 105,938 106,526 104,261 104,288 105,285 110,130 115,396 120,767
YOY growth 2.90% 0.55% ‐2.13% 0.03% 0.96% 4.60% 4.78% 4.65%
Total avg. earning assets 2,204,248 2,320,181 2,309,551 2,250,978 2,340,803 2,455,756 2,575,749 2,690,872
YOY growth 3.88% 5.26% ‐0.46% ‐2.54% 3.99% 4.91% 4.89% 4.47%
Avg. AUM 1,512 1,671 1,734 1,712 1,810 1,914 2,024 2,140
YOY growth 9.49% 10.52% 3.74% ‐1.27% 5.75% 5.75% 5.75% 5.75%
Fee ratio (AM fees/avg. AUM) 5.65 5.77 5.63 5.67 5.55 5.40 5.25 5.15
Interest income yield (US GAAP, unadjusted, interest income/avg.
earning asset)
Loan yield 4.67% 4.40% 4.23% 4.40% 4.45% 4.48% 4.50% 4.50%
Securities yield 2.15% 2.58% 2.58% 2.80% 2.85% 2.88% 2.90% 2.90%
Trading assets yield 2.04% 1.89% 1.78% 1.90% 1.95% 1.98% 2.00% 2.00%
Federal funds yield 0.27% 0.22% 0.20% 0.40% 0.75% 0.80% 0.90% 0.90%
Securities borrowed yield ‐0.02% ‐0.07% ‐0.07% 0.00% 0.05% 0.05% 0.05% 0.05%
Deposits with banks yield 0.13% 0.16% 0.16% 0.20% 0.22% 0.25% 0.25% 0.25%
Other assets yield 0.08% 0.09% 0.08% 0.10% 0.12% 0.15% 0.15% 0.15%
Total interest income yield 2.40% 2.22% 2.21% 2.39% 2.51% 2.56% 2.60% 2.61%
Interest income (US GAAP, unadjusted)
Interest income on loans 33,489 32,218 33,134 37,578 40,927 44,213 47,294 49,838
YOY growth ‐6.54% ‐3.80% 2.84% 13.41% 8.91% 8.03% 6.97% 5.38%
Interest income on securities 7,812 9,040 8,256 8,022 8,046 8,313 8,689 8,893
YOY growth ‐1.60% 15.72% ‐8.67% ‐2.83% 0.29% 3.32% 4.52% 2.36%
Interest income on trading assets 8,426 7,312 6,621 6,618 7,031 7,322 7,573 7,816
YOY growth ‐6.78% ‐13.22% ‐9.45% ‐0.05% 6.25% 4.14% 3.43% 3.21%
Interest income on federal funds sold & securities purchased under
resale agreements
1,940 1,642 1,592 872 1,713 1,911 2,253 2,357
YOY growth ‐20.56% ‐15.36% ‐3.05% ‐45.23% 96.41% 11.58% 17.88% 4.65%
Interest income on securities borrowed (127) (501) (532) 0 53 53 56 59
YOY growth 4133.33% 294.49% 6.19%
Interest income on deposits with banks 918 1,157 1,250 675 747 880 922 965
YOY growth 65.41% 26.03% 8.04%
Interest income on other assets 538 663 652 104 126 165 173 181
YOY growth 107.72% 23.23% ‐1.66%
Total interest income 52,996 51,531 50,973 53,869 58,643 62,858 66,960 70,109
YOY growth ‐5.47% ‐2.76% ‐1.08% 5.68% 8.86% 7.19% 6.53% 4.70%
Net Interest Income 43,319 43,634 43,510 44,953 48,672 51,498 54,347 56,594
YOY growth ‐3.54% 0.73% ‐0.28% 3.32% 8.27% 5.80% 5.53% 4.14%
Provision for credit losses 225 3,139 3,827 6,500 4,009 4,526 4,742 4,963
Net interest income after provision for credit losses 43,094 40,495 39,683 38,453 44,663 46,972 49,605 51,631
YOY growth 3.78% ‐6.03% ‐2.01% ‐3.10% 16.15% 5.17% 5.61% 4.09%
Total net revenue (total net interest + total non‐interest) 96,606 94,205 93,543 95,515 100,286 104,148 108,075 111,589
YOY growth ‐0.44% ‐2.49% ‐0.70% 2.11% 4.99% 3.85% 3.77% 3.25%
Margins
Net interest margin (net interest income/avg. earning assets) 1.97% 1.88% 1.88% 2.00% 2.08% 2.10% 2.11% 2.10%
Net interest margin after provision for credit losses 1.96% 1.75% 1.72% 1.71% 1.91% 1.91% 1.93% 1.92%

JP Morgan
Income Statement (in millions)
Underwriting 5,036 4,911 4,640 4,000 4,120 4,244 4,371 4,502
Advisory 1,318 1,631 2,111 2,000 2,080 2,163 2,250 2,340
Investment banking fees 6,354 6,542 6,751 6,000 6,200 6,407 6,621 6,842
Principal transactions 10,141 10,531 10,408 11,000 11,550 12,128 12,734 13,371
Lending & deposit‐related fees 5,945 5,801 5,694 5,612 5,556 5,500 5,445 5,400
Asset management fees 8,549 9,646 9,755 9,700 10,045 10,335 10,626 11,023
Administration fees 2,101 2,179 2,015 1,800 1,782 1,764 1,747 1,729
Brokerage commissions 2,321 2,270 2,304 2,100 2,079 2,058 2,038 2,025
All other commissions & fees 2,135 1,836 1,435 1,400 1,386 1,372 1,358 1,350
Total commissions & fees 4,456 4,106 3,739 3,500 3,465 3,430 3,396 3,375
Asset management, administration & commissions 15,106 15,931 15,509 15,000 15,292 15,530 15,769 16,127
Securities gains (losses) 667 77 202 200 200 200 200 200
Mortgage fees & related income 5,205 3,563 2,513 2,750 2,846 2,946 3,049 3,156
Card income 6,022 6,020 5,924 6,000 5,970 5,940 5,910 5,900
Other income 3,847 2,106 3,032 4,000 4,000 4,000 4,000 4,000
   Total non‐interest revenue 53,287 50,571 50,033 50,562 51,614 52,651 53,728 54,995
1.91%
Interest Income
Interest income on loans 33,489 32,218 33,134 37,578 40,927 44,213 47,294 49,838
Interest income on securities 7,812 9,040 8,256 8,022 8,046 8,313 8,689 8,893
Interest income on trading assets 8,426 7,312 6,621 6,618 7,031 7,322 7,573 7,816
Interest income on federal funds sold & securities
purchased under resale agreements 1,940 1,642 1,592 872 1,713 1,911 2,253 2,357
Interest income on securities borrowed (127) (501) (532) 0 53 53 56 59
Interest income on deposits with banks 918 1,157 1,250 675 747 880 922 965
Interest income on other assets 538 663 652 104 126 165 173 181
   Total interest income 52,996 51,531 50,973 53,869 58,643 62,858 66,960 70,109
106,283 102,102 101,006 104,431 110,257 115,508 120,688 125,105
Interest Expense
Interest expense on interest‐bearing deposits 2,067 1,633 1,252 1,772 1,945 2,238 2,549 2,931
Interest expense on federal funds purchased & securitiess
sold under agreement repurchase agreements
‐                ‐                609 710 847 1,078 1,317 1,427
Interest expense on commercial paper ‐                ‐                110 59 84 101 118 129
Interest expense on short‐term & other liabilities 2,125 1,450 622 615 786 988 1,129 1,230
Interest expense on long‐term debt 5,007 4,409 4,435 5,346 5,834 6,422 6,919 7,178
Interest expense on beneficial interest issued by
consolidated variable interest entities 478 405 435 415 476 533 581 619
   Total interest expense 9,677 7,897 7,463 8,916 9,971 11,360 12,613 13,515
Net Interest Income 43,319 43,634 43,510 44,953 48,672 51,498 54,347 56,594
‐8.76% 5.399%
Net Revenue 96,606 94,205 93,543 95,515 100,286 104,148 108,075 111,589
3.59%
Provision for Credit Losses 225 3,139 3,827 6,500 4,009 4,526 4,742 4,963
Non‐Interest Expense
Compensation expense 30,810 30,160 29,750 30,800 31,593 32,528 33,491 34,482
Occupancy expense 3,693 3,909 3,768 3,600 3,719 3,681 3,645 3,608
Technology, communications & equipment expense 5,425 5,804 6,193 6,600 6,992 7,411 7,782 8,171
Professional & outside services 7,641 7,705 7,002 6,500 7,000 6,834 6,778 6,871
Marketing expense 2,500 2,550 2,708 2,750 2,805 2,917 3,034 3,155
Other expense 19,761 11,146 9,593 4,700 8,480 8,980 9,480 9,980
Amortization of intangibles 637 ‐                ‐              ‐                ‐               ‐                ‐                ‐
   Total non‐interest expense 70,467 61,274 59,014 54,950 60,588 62,352 64,209 66,267
Income (loss) before income tax expense (benefit) 25,914 29,792 30,702 34,065 35,689 37,270 39,123 40,359
Total income tax expense (benefit) 7,991 8,030 6,260 10,400 10,707 11,181 11,737 12,108
% 31% 27% 20% 31% 30% 30% 30% 30%
Net income (loss) 17,923 21,762 24,442 23,665 24,982 26,089 27,386 28,251
Adjustments
Less: Preferred stock dividends 805 1,125 1,515 1,645 1,700 1,750 1,800 1,800
Dividends & undistributed earnings allocated to
participating securities 525 544 521 485 450 450 450 450
Net income (loss) applicable to common stock 16,593 20,093 22,406 21,535 22,832 23,889 25,136 26,001
3.02%
Shares Outstanding
Year end shares outstanding 3,756 3,715 3,663 3,633 3,617 3,605 3,594 3,586
EPS
Net income (loss) per share ‐ basic $4.39 $5.34 $6.05 $5.93 $6.31 $6.63 $6.99 $7.25
YOY Growth ‐15.93% 21.70% 13.41% ‐2.10% 6.48% 5.00% 5.52% 3.68%
Cash dividends declared per common share $1.44 $1.58 $1.72 $1.88 $2.04 $2.20 $2.36 $2.52
YOY Growth 20.00% 9.72% 8.86% 9.30% 8.51% 7.84% 7.27% 6.78%
Total Dividends Paid $5,408.80 $5,869.37 $6,301.18 $6,830.02 $7,379.54 $7,930.00 $8,482.20 $9,036.84

JP Morgan
Balance Sheet (in millions)
Assets
Cash & due from banks 39,771 27,831 20,490 40,437 35,569 33,674 33,422 41,455
Deposits with banks 316,051 484,477 340,015 335,117 343,816 360,214 377,480 394,549
Federal funds sold & securities purchase under resale
agreements 248,116 215,803 212,575 223,411 233,304 244,431 256,147 267,729
Securities borrowed 111,465 110,435 98,721 105,826 104,373 109,351 114,592 119,774
Trading assets 374,664 398,988 343,839 352,755 368,374 373,079 384,221 397,367
Securities 354,003 348,004 290,827 282,204 282,420 295,890 303,332 310,002
Total wholesale loans 321,564 330,914 361,015 387,041 418,005 447,265 474,101 497,806
Total consumer loans ‐ excluding purchased credit‐
impaired
289,063 295,374 344,821 360,039 388,842 416,061 441,024 463,075
Credit card 127,791 131,048 131,463 153,016 165,258 176,826 187,435 196,807
Loans 738,418 757,336 837,299 900,096 972,104 1,040,151 1,102,561 1,157,689
Allowance for loan losses (16,264) (14,185) (13,555) (15,752) (17,012) (19,243) (21,500) (23,733)
Loans, net of allowance for loan losses 722,154 743,151 823,744 884,345 955,092 1,020,909 1,081,061 1,133,956
Accrued interest & accounts receivable 65,160 70,079 46,605 59,968 73,675 77,189 80,889 84,546
Premises & equipment 14,891 15,133 14,362 14,110 14,078 13,937 13,798 13,660
Goodwill 48,081 47,647 47,325 47,150 47,000 47,000 47,000 47,000
Mortgage servicing rights 9,614 7,436 6,608 6,585 6,876 7,204 7,550 7,891
Other intangible assets 1,618 1,192 1,015 915 815 715 615 515
Other assets 110,101 102,950 105,572 103,004 107,565 112,695 118,097 123,437
Total Assets 2,415,689 2,573,126 2,351,698 2,455,827 2,572,956 2,696,287 2,818,204 2,941,881
Liabilities
U.S. non‐interest bearing deposits 389,863 437,558 392,721 411,375 434,001 457,871 480,764 504,803
U.S. interest‐bearing deposits 626,392 643,350 663,004 692,839 730,945 771,147 809,705 850,190
Non‐U.S. non‐interest bearing deposits 17,611 19,078 18,921 19,110 19,445 19,736 19,983 20,183
Non‐U.S. interest bearing deposits 253,899 263,441 205,069 210,606 217,977 225,606 232,374 239,346
Total deposits 1,287,765 1,363,427 1,279,715 1,333,931 1,402,368 1,474,361 1,542,827 1,614,521
Federal funds purchased & securities loaned or sold under
repurchase agreements
181,163 192,101 152,678 163,070 175,561 183,818 192,579 201,132
Commercial paper 57,848 66,344 15,562 19,989 21,945 22,977 24,072 25,141
Other borrowed funds 27,994 30,222 21,105 21,041 27,431 28,722 30,090 31,427
Trading liabilities 137,744 152,815 126,897 152,549 159,103 166,586 174,525 182,276
Accounts payable & other liabilities 194,491 206,954 177,638 173,590 175,561 183,818 192,579 201,132
Beneficial interest issued by consolidated variable interest
entities
49,617 52,362 41,879 41,030 41,696 43,657 45,738 47,769
FHLB advances 61,876 64,994 71,581 69,436 71,322 74,676 78,235 81,710
Senior debt 170,990 176,874 188,074 189,371 190,923 195,307 198,597 201,132
Subordinated debt 29,578 29,472 25,027 25,250 26,334 27,573 28,887 30,170
Junior subordinated debt 5,445 5,496 3,969 5,260 5,486 5,744 6,018 6,285
Total long‐term debt 267,889 276,836 288,651 289,317 294,065 303,301 311,738 319,297
Total Liabilities 2,204,511 2,341,061 2,104,125 2,194,518 2,297,731 2,407,240 2,514,148 2,622,694
SH Equity
Total preferred stock 11,158 20,063 26,068 26,068 26,068 26,068 26,068 26,068
Common stock and APIC 97,933 97,375 96,605 97,412 98,219 99,026 99,833 100,639
Retained earnings 115,756 130,315 146,420 161,125 176,578 192,537 209,191 226,156
Accumulated other comprehensive income (loss) 1,199 2,189 192 1,725 1,881 1,437 1,485 1,344
Shares held in RSU Trust, at cost (21) (21) (21) (21) (21) (21) (21) (21)
Treasury stock, at cost (14,847) (17,856) (21,691) (25,000) (27,500) (30,000) (32,500) (35,000)
Total stockholders' equity 211,178 232,065 247,573 261,309 275,225 289,047 304,056 319,186
Total liabilities and equity 2,415,689 2,573,126 2,351,698 2,455,827 2,572,956 2,696,287 2,818,204 2,941,881

JP Morgan
Cash Flow Statement (in millions)
Fiscal Years Ending Dec. 31 2013 2014 2015
Operating Activities
   Net income 17,923 21,762 24,442
Provision for credit losses 225 3,139 3,827
Depreciation & amortization 4,669 4,759 4,940
Deferred tax expense (benefit) 8,003 4,210 1,333
Amortization of intangibles 637 ‐ ‐
Investment securities losses (gains) (667) (77) ‐
Stock‐based compensation 2,219 2,190 ‐
Other adjustments ‐ ‐ 1,785
Originations & purchases of loans held‐for‐sale (75,928) (67,525) (48,109)
Proceeds from sales, securitizations & paydowns of loans
held‐for‐sale 73,566 71,407 49,363
Trading assets 89,110 (24,814) 62,212
Securities borrowed 7,562 1,020 12,165
Accrued interest & accounts receivable (2,340) (3,637) 22,664
Other assets 526 (9,166) (3,701)
Trading liabilities (9,772) 26,818 (28,972)
Accounts payable & other liabilities (5,743) 6,065 (23,361)
Other operating adjustments (2,037) 442 (5,122)
   Net cash flows from operating activities 107,953 36,593 73,466
Investing Activities
Net change in deposits with banks (194,363) (168,426) 144,462
Net change in federal funds sold & securities purchased
under resale agreements 47,726 30,848 3,190
Proceeds from held‐to‐maturity securities ‐ ‐ ‐
Proceeds from paydowns & maturities held‐to‐maturity
securities 189 4,169 6,099
Purchase of held‐to‐maturity securities (24,214) (10,345) (6,204)
Proceeds from maturities of available‐for‐sale securities ‐ ‐ ‐
Proceeds from paydowns & maturities available‐for‐sale
securities 89,631 90,664 76,448
Proceed from sales of available‐for‐sale securities 73,312 38,411 40,444
Purchases of available‐for‐sale securities (130,266) (121,504) (70,804)
Proceeds from sales & securitizations of loans held‐for‐
investment 12,033 20,115 18,604
Other changes in loans, net (23,721) (51,749) (108,962)
Net cash received from/(used in) business acquisitions or
dispositions (149) 843 ‐
All other investing activities, net (679) 1,338 3,703
   Net cash (used in) provided by investing activities (150,501) (165,636) 106,980
Financing Activities
Net change in deposits 81,476 89,346 (88,678)
Net change in federal funds purchased & securities sold
under repurchase agreements ‐ ‐ ‐
Net change in federal funds purchased & securities loaned
or sold under repurchase agreements (58,867) 10,905 (39,415)
Net change in commercial paper & other borrowed funds 2,784 9,242 (57,828)
Net change in beneficial interests issued by consolidated
variable interest entities (10,433) (834) (5,632)
Proceeds from long‐term borrowings & trust preferred
securities 83,546 ‐ ‐
Proceeds from long‐term borrowings ‐ 78,515 79,611
Payments of long‐term borrowings & trust preferred
securities (60,497) ‐ ‐
Payments of long‐term borrowings ‐ (65,275) (67,247)
Excess tax benefits related to stock‐based compensation 137 407 ‐
Proceeds from issuance of preferred stock 3,873 8,847 5,893
Redemption of preferred stock (1,800) ‐ ‐
Treasury stock & warrants repurchased (4,789) (4,760) (5,616)
Dividends paid (6,056) (6,990) (7,873)
All other financing activities, net (1,050) (1,175) (726)
   Net cash provided by (used in) financing activities 28,324 118,228 (187,511)
Effect of exchange rate changes on cash & due from
banks 272 (1,125) (276)
Net increase (decrease) in cash & due from banks (13,952) (11,940) (7,341)
Cash & due from banks at the beginning of the period 53,723 39,771 27,831
Cash & due from banks at the end of period 39,771 27,831 20,490
Cash interest paid 9,573 8,194 7,220
Cash income taxes paid, net 3,502 1,392 9,243

JP Morgan
Cash Flow Statement (in millions)
Fiscal Years Ending Dec. 31
2016E 2017E 2018E 2019E 2020E (CV)
Operating Activities
   Net income applicable to common stock 21,535 22,832 23,889 25,136 26,001
Change in securities borrowed (7,105) 1,454 (4,978) (5,242) (5,181)
Change in trading assets (8,916) (15,619) (4,705) (11,142) (13,146)
Change in securities 8,623 (216) (13,470) (7,442) (6,670)
Change in accrued interest and accounts receivable (13,363) (13,707) (3,514) (3,700) (3,658)
Change in premises and equipment 252 32 141 139 138
Change in mortgage servicing rights 23 (292) (328) (345) (341)
Change in other intangibles 100 100 100 100 100
Change in other assets 2,568 (4,561) (5,130) (5,402) (5,340)
Change in trading liabilities 25,652 6,553 7,483 7,939 7,751
Change in accounts payable and other liabilities (4,048) 1,971 8,257 8,761 8,553
   Net cash provided by operating activities 25,321 (1,452) 7,745 8,802 8,206
Investing Activities
Change in deposits with banks 4,898 (8,699) (16,398) (17,266) (17,068)
Change in federal funds sold and securities purchased under resale (10,836) (9,892) (11,127) (11,716) (11,582)
Change in loans (net of allowance)   (60,601) (70,748) (65,816) (60,152) (52,895)
   Change in goodwill 175 150 0 0 0
Change in federal funds purchased & securities loaned or sold under
repurchases
10,392 12,492 8,257 8,761 8,553
   Net cash (used in) provided by investing activities (55,972) (76,697) (85,085) (80,374) (72,993)
Financing Activities
Change in total deposits 54,216 68,437 71,993 68,466 71,695
Change in commercial paper 4,427 1,956 1,032 1,095 1,069
Change in other borrowed funds (64) 6,390 1,290 1,369 1,336
Change in beneficial interest issued by consolidated VIEs (849) 665 1,961 2,081 2,031
Change in long‐term debt 666 4,748 9,235 8,437 7,559
Dividends paid (6,830) (7,380) (7,930) (8,482) (9,037)
Change in CS and APIC 807 807 807 807 807
Change in AOCI 1,533 156 (444) 48 (141)
Change in treasuty stock, at cost (3,309) (2,500) (2,500) (2,500) (2,500)
   Net cash provided by (used in) financing activities 50,598 73,281 75,444 71,320 72,820
Net (decrease) increase in cash and cash equivalents 19,947 (4,868) (1,895) (252) 8,033
Cash and cash equivalents at beginning of period 20,490 40,437 35,569 33,674 33,422
Cash and cash equivalents at end of period 40,437 35,569 33,674 33,422 41,455

JP Morgan
Common Size Income Statement (as % of assets)
Underwriting 0.21% 0.19% 0.20% 0.16% 0.16% 0.16% 0.16% 0.15%
Advisory 0.05% 0.06% 0.09% 0.08% 0.08% 0.08% 0.08% 0.08%
Investment banking fees 0.26% 0.25% 0.29% 0.24% 0.24% 0.24% 0.23% 0.23%
Principal transactions 0.42% 0.41% 0.44% 0.45% 0.45% 0.45% 0.45% 0.45%
Lending & deposit‐related fees 0.25% 0.23% 0.24% 0.23% 0.22% 0.20% 0.19% 0.18%
Asset management fees 0.35% 0.37% 0.41% 0.39% 0.39% 0.38% 0.38% 0.37%
Administration fees 0.09% 0.08% 0.09% 0.07% 0.07% 0.07% 0.06% 0.06%
Brokerage commissions 0.10% 0.09% 0.10% 0.09% 0.08% 0.08% 0.07% 0.07%
All other commissions & fees 0.09% 0.07% 0.06% 0.06% 0.05% 0.05% 0.05% 0.05%
Total commissions & fees 0.18% 0.16% 0.16% 0.14% 0.13% 0.13% 0.12% 0.11%
Asset management, administration & commissions 0.63% 0.62% 0.66% 0.61% 0.59% 0.58% 0.56% 0.55%
Securities gains (losses) 0.03% 0.00% 0.01% 0.01% 0.01% 0.01% 0.01% 0.01%
Mortgage fees & related income 0.22% 0.14% 0.11% 0.11% 0.11% 0.11% 0.11% 0.11%
Card income 0.25% 0.23% 0.25% 0.24% 0.23% 0.22% 0.21% 0.20%
Other income 0.16% 0.08% 0.13% 0.16% 0.16% 0.15% 0.14% 0.14%
   Total non‐interest revenue 2.21% 1.97% 2.13% 2.06% 2.01% 1.95% 1.91% 1.87%
Interest Income
Interest income on loans 1.39% 1.25% 1.41% 1.53% 1.59% 1.64% 1.68% 1.69%
Interest income on securities 0.32% 0.35% 0.35% 0.33% 0.31% 0.31% 0.31% 0.30%
Interest income on trading assets 0.35% 0.28% 0.28% 0.27% 0.27% 0.27% 0.27% 0.27%
Interest income on federal funds sold & securities
purchased under resale agreements 0.08% 0.06% 0.07% 0.04% 0.07% 0.07% 0.08% 0.08%
Interest income on securities borrowed ‐0.01% ‐0.02% ‐0.02% 0.00% 0.00% 0.00% 0.00% 0.00%
Interest income on deposits with banks 0.04% 0.04% 0.05% 0.03% 0.03% 0.03% 0.03% 0.03%
Interest income on other assets 0.02% 0.03% 0.03% 0.00% 0.00% 0.01% 0.01% 0.01%
   Total interest income 2.19% 2.00% 2.17% 2.19% 2.28% 2.33% 2.38% 2.38%
Interest Expense
Interest expense on interest‐bearing deposits 0.09% 0.06% 0.05% 0.07% 0.08% 0.08% 0.09% 0.10%
Interest expense on federal funds purchased & securitiess
sold under agreement repurchase agreements 0.00% 0.00% 0.03% 0.03% 0.03% 0.04% 0.05% 0.05%
Interest expense on commercial paper 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Interest expense on short‐term & other liabilities 0.09% 0.06% 0.03% 0.03% 0.03% 0.04% 0.04% 0.04%
Interest expense on long‐term debt 0.21% 0.17% 0.19% 0.22% 0.23% 0.24% 0.25% 0.24%
Interest expense on beneficial interest issued by
consolidated variable interest entities 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02%
   Total interest expense 0.40% 0.31% 0.32% 0.36% 0.39% 0.42% 0.45% 0.46%
Net Interest Income 1.79% 1.70% 1.85% 1.83% 1.89% 1.91% 1.93% 1.92%
Net Revenue 4.00% 3.66% 3.98% 3.89% 3.90% 3.86% 3.83% 3.79%
Provision for Credit Losses 0.01% 0.12% 0.16% 0.26% 0.16% 0.17% 0.17% 0.17%
Non‐Interest Expense
Compensation expense 1.28% 1.17% 1.27% 1.25% 1.23% 1.21% 1.19% 1.17%
Occupancy expense 0.15% 0.15% 0.16% 0.15% 0.14% 0.14% 0.13% 0.12%
Technology, communications & equipment expense 0.22% 0.23% 0.26% 0.27% 0.27% 0.27% 0.28% 0.28%
Professional & outside services 0.32% 0.30% 0.30% 0.26% 0.27% 0.25% 0.24% 0.23%
Marketing expense 0.10% 0.10% 0.12% 0.11% 0.11% 0.11% 0.11% 0.11%
Other expense 0.82% 0.43% 0.41% 0.19% 0.33% 0.33% 0.34% 0.34%
Amortization of intangibles 0.03% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
   Total non‐interest expense 2.92% 2.38% 2.51% 2.24% 2.35% 2.31% 2.28% 2.25%
Income Before Taxes
Income before income tax expense ‐ U.S. 0.71% 0.88% 0.99% 1.04% 1.04% 1.04% 1.04% 1.03%
Income before income tax expense ‐ non‐U.S. 0.36% 0.28% 0.32% 0.35% 0.35% 0.35% 0.35% 0.34%
Income (loss) before income tax expense (benefit) 1.07% 1.16% 1.31% 1.39% 1.39% 1.38% 1.39% 1.37%
Total income tax expense (benefit) 0.33% 0.31% 0.27% 0.42% 0.42% 0.41% 0.42% 0.41%
Net income (loss) 0.74% 0.85% 1.04% 0.96% 0.97% 0.97% 0.97% 0.96%
Adjustments
Less: Preferred stock dividends 0.03% 0.04% 0.06% 0.07% 0.07% 0.06% 0.06% 0.06%
Dividends & undistributed earnings allocated to
participating securities 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02%
Net income (loss) applicable to common stock 0.69% 0.78% 0.95% 0.88% 0.89% 0.89% 0.89% 0.88%

JP Morgan
Common Size Balance Sheet (as % of assets)
Assets
Cash & due from banks 1.65% 1.08% 0.87% 1.65% 1.38% 1.25% 1.19% 1.41%
Deposits with banks 13.08% 18.83% 14.46% 13.65% 13.36% 13.36% 13.39% 13.41%
Federal funds sold & securities purchased under
resale agreements 10.27% 8.39% 9.04% 9.10% 9.07% 9.07% 9.09% 9.10%
Securities borrowed 4.61% 4.29% 4.20% 4.31% 4.06% 4.06% 4.07% 4.07%
Trading assets 15.51% 15.51% 14.62% 14.36% 14.32% 13.84% 13.63% 13.51%
Securities 14.65% 13.52% 12.37% 11.49% 10.98% 10.97% 10.76% 10.54%
Loans 30.57% 29.43% 35.60% 36.65% 37.78% 38.58% 39.12% 39.35%
Allowance for loan losses ‐0.67% ‐0.55% ‐0.58% ‐0.64% ‐0.66% ‐0.71% ‐0.76% ‐0.81%
Loans, net of allowance for loan losses 29.89% 28.88% 35.03% 36.01% 37.12% 37.86% 38.36% 38.55%
Accrued interest & accounts receivable 2.70% 2.72% 1.98% 2.44% 2.86% 2.86% 2.87% 2.87%
Premises & equipment 0.62% 0.59% 0.61% 0.57% 0.55% 0.52% 0.49% 0.46%
Goodwill 1.99% 1.85% 2.01% 1.92% 1.83% 1.74% 1.67% 1.60%
Mortgage servicing rights 0.40% 0.29% 0.28% 0.27% 0.27% 0.27% 0.27% 0.27%
Other intangible assets 0.07% 0.05% 0.04% 0.04% 0.03% 0.03% 0.02% 0.02%
Other assets 4.56% 4.00% 4.49% 4.19% 4.18% 4.18% 4.19% 4.20%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Liabilities
U.S. non‐interest bearing deposits 16.14% 17.00% 16.70% 16.75% 16.87% 16.98% 17.06% 17.16%
U.S. interest‐bearing deposits 25.93% 25.00% 28.19% 28.21% 28.41% 28.60% 28.73% 28.90%
Non‐U.S. non‐interest bearing deposits 0.73% 0.74% 0.80% 0.78% 0.76% 0.73% 0.71% 0.69%
Non‐U.S. interest bearing deposits 10.51% 10.24% 8.72% 8.58% 8.47% 8.37% 8.25% 8.14%
Total deposits 53.31% 52.99% 54.42% 54.32% 54.50% 54.68% 54.75% 54.88%
Federal funds purchased & securities loaned or
sold under repurchase agreements 7.50% 7.47% 6.49% 6.64% 6.82% 6.82% 6.83% 6.84%
Commercial paper 2.39% 2.58% 0.66% 0.81% 0.85% 0.85% 0.85% 0.85%
Other borrowed funds 1.16% 1.17% 0.90% 0.86% 1.07% 1.07% 1.07% 1.07%
Trading liabilities 5.70% 5.94% 5.40% 6.21% 6.18% 6.18% 6.19% 6.20%
Accounts payable & other liabilities 8.05% 8.04% 7.55% 7.07% 6.82% 6.82% 6.83% 6.84%
Beneficial interest issued by consolidated variable
interest entities 2.05% 2.03% 1.78% 1.67% 1.62% 1.62% 1.62% 1.62%
FHLB advances 2.56% 2.53% 3.04% 2.83% 2.77% 2.77% 2.78% 2.78%
Senior debt 7.08% 6.87% 8.00% 7.71% 7.42% 7.24% 7.05% 6.84%
Subordinated debt 1.22% 1.15% 1.06% 1.03% 1.02% 1.02% 1.03% 1.03%
Junior subordinated debt 0.23% 0.21% 0.17% 0.21% 0.21% 0.21% 0.21% 0.21%
Total long‐term debt 11.09% 10.76% 12.27% 11.78% 11.43% 11.25% 11.06% 10.85%
Total Liabilities 91.26% 90.98% 89.47% 89.36% 89.30% 89.28% 89.21% 89.15%
SH Equity
Total preferred stock 0.46% 0.78% 1.11% 1.06% 1.01% 0.97% 0.92% 0.89%
Common stock and APIC 4.05% 3.78% 4.11% 3.97% 3.82% 3.67% 3.54% 3.42%
Retained earnings 4.79% 5.06% 6.23% 6.56% 6.86% 7.14% 7.42% 7.69%
Accumulated other comprehensive income (loss) 0.05% 0.09% 0.01% 0.07% 0.07% 0.05% 0.05% 0.05%
Shares held in RSU Trust, at cost 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Treasury stock, at cost ‐0.61% ‐0.69% ‐0.92% ‐1.02% ‐1.07% ‐1.11% ‐1.15% ‐1.19%
Total stockholders' equity 8.74% 9.02% 10.53% 10.64% 10.70% 10.72% 10.79% 10.85%
Total liabilities and equity 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%

JP Morgan
Cost of Equity Estimation
Weekly Beta (Bloomberg) Cost of equity (CAPM) 8.58%
1 yr. 1.31 Risk Free Rate 2.28%
2 yr. 1.19 Beta 1.26
3 yr. 1.21 Market Risk Premium 5.00%
4 yr. 1.21
5 yr. 1.38
10 yr. 1.59 CAPM = RFR + B * MRP

JP Morgan
Value Driver Estimation (in thousands)
Key assumptions:
ROE (NI/beg. TSE) 8.13% 9.51% 9.65% 8.70% 8.74% 8.68% 8.70% 8.55%
Cost of equity 8.58% 8.58% 8.58% 8.58% 8.58% 8.58% 8.58% 8.58%
Net Income applicable to common stock 16,593 20,093 22,406 21,535 22,832 23,889 25,136 26,001
Beg. SH equity 204,069 211,178 232,065 247,573 261,309 275,225 289,047 304,056
Ending SH equity 211,178 232,065 247,573 261,309 275,225 289,047 304,056 319,186
Beg. Total assets 2,359,141 2,415,689 2,573,126 2,351,698 2,455,827 2,572,956 2,696,287 2,818,204
Ending total assets 2,415,689 2,573,126 2,351,698 2,455,827 2,572,956 2,696,287 2,818,204 2,941,881
Change in total assets 56,548 157,437 (221,428) 104,129 117,129 123,330 121,917 123,677
Beg. Total liabilities 2,155,072 2,204,511 2,341,061 2,104,125 2,194,518 2,297,731 2,407,240 2,514,148
Ending total liabilities 2,204,511 2,341,061 2,104,125 2,194,518 2,297,731 2,407,240 2,514,148 2,622,694
Change in total liabilities 49,439 136,550 (236,936) 90,393 103,213 109,509 106,908 108,547
Simple FCFE (NI ‐ (change in TA) + (change in TL)) 9,484 (794) 6,898 7,799 8,916 10,067 10,128 10,871
Non‐cash items
Depreciation and amortization 4,669 4,759 4,940 0 0 0 0 0
Provision for credit losses 225 3,139 3,827 6,500 4,009 4,526 4,742 4,963
Cash from operations (NI + non‐cash items) 21,487 27,991 31,173 28,035 26,842 28,415 29,879 30,964
Sources of cash
Change in deposits 94,172 75,662 (83,712) 54,216 68,437 71,993 68,466 71,695
Change in commercial paper 2,481 8,496 (50,782) 4,427 1,956 1,032 1,095 1,069
Change in external debt 20,223 11,175 2,698 602 11,138 10,525 9,806 8,896
Change in trading liabilities 5,826 15,071 (25,918) 25,652 6,553 7,483 7,939 7,751
Change in fed funds/repo financing (58,940) 10,938 (39,423) 10,392 12,492 8,257 8,761 8,553
Change in accounts payable and other liabilities (749) 12,463 (29,316) (4,048) 1,971 8,257 8,761 8,553
Total sources of cash 63,013 133,805 (226,453) 91,241 102,548 107,547 104,828 106,515
Uses of cash
New loans 10,294 20,997 80,593 60,601 70,748 65,816 60,152 52,895
Change in cash (13,952) (11,940) (7,341) 19,947 (4,868) (1,895) (252) 8,033
Change in deposits with banks 194,237 168,426 (144,462) (4,898) 8,699 16,398 17,266 17,068
Change in securities held (17,149) (5,999) (57,177) (8,623) 216 13,470 7,442 6,670
Change in premises and equipment, net 372 242 (771) (252) (32) (141) (139) (138)
Change in accrued interest receivable 4,227 4,919 (23,474) 13,363 13,707 3,514 3,700 3,658
Change in trading assets (75,364) 24,324 (55,149) 8,916 15,619 4,705 11,142 13,146
Change in mortgage servicing rights 2,000 (2,178) (828) (23) 292 328 345 341
Change in fed funds/repo investments (48,180) (32,313) (3,228) 10,836 9,892 11,127 11,716 11,582
Change in securities borrowed (7,552) (1,030) (11,714) 7,105 (1,454) 4,978 5,242 5,181
Change in other assets 8,326 (7,151) 2,622 (2,568) 4,561 5,130 5,402 5,340
Total uses of cash 57,259 158,297 (220,929) 104,404 117,379 123,430 122,017 123,777
Formal FCFE (cash from ops. + sources ‐ uses) 27,241 3,499 25,649 14,872 12,010 12,532 12,689 13,703
Equity Economic Profit (Beg. TSE*(ROE ‐ Cost of Equity)) (916) 1,974 2,494 294 412 275 336 (87)

JP Morgan
Equity Discounted Cash Flow (EDCF) and Equity Economic Profit (EEP) Valuation Models
Key Inputs:
Model Date 9/2/2016
     CV Growth 3.00%
     CV ROE 8.54%
     Cost of Equity 8.58%
     Net Income CV 26001
Fiscal Years Ending Dec. 31 2016E 2017E 2018E 2019E 2020E
Period 1 2 3 4 5
EDCF Model
Formal FCFE 14872 12010 12532 12689 13703
CV 302333
Discounted FCFE 13697 10187 9790 9129 217514
PV of FCFE 260317
PV of ESOP 1689
PV of Equity 258628
Shares outstanding at end of year 3663
Intrinsic value 12/31/2015 $70.60
Price today $73.32
Period 1 2 3 4 5
EDCF Model
Simple FCFE 7799 8916 10067 10128 10871
CV 302333
Discounted FCFE 7183 7563 7864 7286 217514
PV of FCFE 247410
PV of ESOP 1689
PV of Equity 245721
Price today $69.66
Period 1 2 3 4 5
EEP Model
EEP 294 412 275 336 ‐87
CV ‐1722
Discounted EEP 270 349 215 242 ‐1239
PV of EEP 247410
PV of ESOP 1689
PV of Equity 245721
Price today $69.66

JP Morgan
Dividend Discount Model (DDM) or Fundamental P/E Valuation Model
Model Date: 9/2/2016
Period 1 2 3 4 5
EPS 5.93 6.31 6.63 6.99 7.25
Key Assumptions
   CV growth 3.25%
   CV ROE 8.54%
   Cost of Equity 8.58%
Future Cash Flows
     P/E Multiple (CV Year) 11.62
     EPS (CV Year) 7.25
     Future Stock Price 84.28
     Dividends Per Share 1.88 2.04 2.20 2.36 2.52
     Future Cash Flows
     Discounted Cash Flows 1.73 1.73 1.72 1.70 60.64
Intrinsic Value 12/31/2015 $65.78
Price today $69.53

JP Morgan
Relative Valuation Models
As of: 9/2/2016
EPS EPS
Ticker Company USD Market Cap (B) Price 2016E 2017E P/E 16 P/E 17 P/B 16 P/B 17 P/TBV 16 P/TBV 17
BAC Bank of America 163 $16.00 $1.26 1.54 12.70 10.39 0.70 0.60 0.90 0.90
C Citi 138 $47.51 $4.64 5.19 10.24 9.15 0.60 0.60 0.70 0.70
GS Goldman Sachs 69 $169.18 $14.26 16.99 11.86 9.96 0.90 0.90 1.00 0.90
MS Morgan Stanley 61 $31.89 $2.48 2.95 12.86 10.81 0.90 0.80 1.00 0.90
PNC PNC 73 $90.54 $7.11 7.43 12.73 12.19 1.00 1.00 1.30 1.20
USB US Bancorp 76 $44.16 $3.25 3.41 13.59 12.95 1.80 1.70 2.20 2.10
WFC Wells Fargo 255 $50.55 $4.03 4.18 12.54 12.09 1.40 1.30 1.70 1.60
Average 5.29           5.96           12.36        11.08        1.04           0.99           1.26               1.19
JPM JP Morgan 244 $67.49 $5.93 $6.31 11.4           10.7                     0.94           0.89 1.15               1.07
Implied Value:
   Relative P/E (EPS16) $73.27
   Relative P/E (EPS17) $69.92
   Relative P/B (BV16) $75.01
   Relative P/B (BV17) $75.00
   Relative P/TBV (TBV16) $73.79
   Relative P/TBV (TBV17) $74.54

JP Morgan
Sensitivity Analysis
Risk Premium Beta
$69.66 4.00% 4.50% 5.00% 5.50% 6.00% $69.66 1 1.13 1.26 1.39 1.52
20.00% $103.92 $90.04 $79.31 $70.77 $63.82 1.75% $105.30 $89.23 $77.30 $68.11 $60.81
Marginal 25.00% $97.43 $84.48 $74.48 $66.51 $60.02 Risk‐Free 2.00% $98.50 $84.24 $73.50 $65.11 $58.39
Tax‐Rate 30.00% $90.94 $78.93 $69.66 $62.25 $56.23 Rate 2.28% $91.83 $79.27 $69.66 $62.04 $55.88
35.00% $84.47 $73.39 $64.82 $58.00 $52.44 2.50% $87.17 $75.74 $66.88 $59.82 $54.06
40.00% $78.00 $67.85 $60.00 $53.75 $48.66 2.75% $82.40 $72.08 $63.98 $57.47 $52.12
CV Growth CV Non‐Interest Rev
$69.66 2.00% 2.50% 3.00% 3.50% 4.00% $69.66 50000 52250 54972 57750 60000
7.50% $67.09 $66.13 $65.01 $63.66 $62.02 60000 $44.60 $48.34 $52.86 $57.47 $61.21
CV ROE 8.00% $68.43 $67.95 $67.38 $66.70 $65.88 CV Interest 65000 $52.90 $56.64 $61.16 $65.77 $69.51
8.54% $69.71 $69.68 $69.66 $69.61 $69.56 Income 70110 $61.39 $65.13 $69.66 $74.26 $77.99
9.00% $70.67 $70.98 $71.34 $71.78 $72.31 75000 $69.51 $73.25 $77.77 $82.38 $86.12
9.50% $71.61 $72.25 $73.01 $73.91 $75.02 80000 $77.81 $81.55 $86.07 $90.68 $94.42
CV Loan Yield CV Non‐Interest Expense
$69.66 3.50% 4.00% 4.50% 5.00% 5.50% $69.66 60000 63000 66267 69000 72000
2.30% $48.20 $57.39 $66.59 $75.79 $84.98 9500 $86.72 $81.74 $76.31 $71.78 $66.79
CV Securities 2.60% $49.73 $58.92 $68.12 $77.31 $86.51 CV Interest 11500 $83.40 $78.42 $72.99 $68.45 $63.47
Yield 2.90% $51.25 $60.45 $69.66 $78.84 $88.04 Expense 13515 $80.05 $75.07 $69.66 $65.11 $60.13
3.20% $52.78 $61.98 $71.17 $80.37 $89.57 15500 $76.76 $71.78 $66.35 $61.81 $56.83
3.50% $54.31 $63.51 $72.70 $81.90 $91.09 17500 $73.44 $68.45 $63.03 $58.49 $53.51

JP Morgan
Key Management Ratios
Fiscal Years Ending Dec. 31 2013 2014 2015 2016E 2017E 2018E 2019E 2020E
Margins, Spreads and Profitability
Net interest margin (net interest income/avg. earning assets) 1.97% 1.88% 1.88% 2.00% 2.08% 2.10% 2.11% 2.10%
Net interest spread ((interest income/ avg earning assets) ‐
(interest expense/avg interest paying liabilities))
1.25% 1.34% 1.37% 1.39% 1.43% 1.39% 1.36% 1.34%
Interest income/avg earning assets 2.40% 2.22% 2.21% 2.39% 2.51% 2.56% 2.60% 2.61%
Interest expense/avg interest paying liabilities 1.15% 0.88% 0.84% 1.01% 1.08% 1.17% 1.24% 1.27%
Interest expense/avg total liabilities 0.44% 0.35% 0.34% 0.41% 0.44% 0.48% 0.51% 0.53%
Efficiency (non‐interest expense/(net interest income + non‐
interest income))
72.94% 65.04% 63.09% 57.53% 60.42% 59.87% 59.41% 59.39%
Provision for credit losses/avg gross loans outstanding 0.03% 0.42% 0.48% 0.75% 0.43% 0.45% 0.44% 0.44%
Avg. ROA (NI/avg assets) 0.70% 0.81% 0.91% 0.90% 0.91% 0.91% 0.91% 0.90%
Avg. ROE (NI/avg SH equity) 7.99% 9.07% 9.34% 8.46% 8.51% 8.47% 8.48% 8.34%
9.16%
Leverage Ratios
Basel [on‐balance sheet only] Leverage Ratio ((SH equity‐
Goodwill‐Other Intangibles)/avg total assets) 6.76% 7.35% 8.09% 8.87% 9.04% 9.16% 9.30% 9.43%
Non‐deposit debt/total assets 22.14% 21.98% 20.33% 20.09% 20.17% 19.98% 19.82% 19.61%
Non‐deposit debt/SH equity 2.24 2.11 2.04 1.95 1.88 1.84 1.79 1.74
Total debt to assets (all debt/total assets) 75.45% 74.96% 74.74% 74.41% 74.68% 74.66% 74.56% 74.49%
Total debt to equity (all debt/SH equity) 2.54 2.39 2.33 2.21 2.14 2.10 2.05 2.00
Liabilities to assets (total liabilities/total assets) 91.26% 90.98% 89.47% 89.36% 89.30% 89.28% 89.21% 89.15%
Liabilities to equity (total liabilities/SH equity) 10.44 10.09 8.50 8.40 8.35 8.33 8.27 8.22
B/S Metrics
Avg. earning assets/avg. total assets 92.33% 93.02% 93.79% 93.64% 93.10% 93.21% 93.42% 93.43%
Total loans/total assets 30.57% 29.43% 35.60% 36.65% 37.78% 38.58% 39.12% 39.35%
Assets per deposit (total assets/total deposits) 187.59% 188.72% 183.77% 184.10% 183.47% 182.88% 182.66% 182.21%
Loan loss allowance/total loans 2.20% 1.87% 1.62% 1.75% 1.75% 1.85% 1.95% 2.05%
Loan growth ((total loan t/total loans t‐1)‐1) 0.63% 2.56% 10.56% 7.50% 8.00% 7.00% 6.00% 5.00%
Total asset growth 2.40% 6.52% ‐8.61% 4.43% 4.77% 4.79% 4.52% 4.39%
Deposit growth 7.89% 5.88% ‐6.14% 4.24% 5.13% 5.13% 4.64% 4.65%
Book value per share (SH equity/shares outstanding) 56.22 62.47 67.58 71.93 76.08 80.19 84.60 89.01
Tangible book value per share ((SH equity ‐ goodwill ‐
intangibles)/shares outstanding)
42.99 49.32 54.38 58.70 62.87 66.95 71.35 75.76
Payout Policy Ratios
Payout ratio 33% 30% 28% 32% 32% 33% 34% 35%
Retention ratio 67% 70% 72% 68% 68% 67% 66% 65%

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