In a significant endorsement of its operational prowess and market leadership, JPMorgan JPM has received an issuer credit rating upgrade from S&P Global Ratings. The company’s long- and short-term ratings have been elevated to A and A-1 from A- and A-2, respectively.
Accompanied by a stable long-term outlook, this upgrade reflects JPMorgan’s strong fundamentals, adaptability across economic cycles and strategic leadership.
As S&P Global noted, JPM’s ratings are now among the highest for banks globally.
What Led to the Upgrade in JPM’s Ratings?
S&P Global’s decision underscores JPMorgan’s diverse business model, industry-leading market share and ability to sustain profitability in varied economic conditions.
Dominance Across Financial Segments: JPMorgan has cemented its status as a leader in multiple banking sectors. As the world’s largest investment banking and trading institution, it has consistently expanded its market share in advisory services and lending.
On the retail side, JPMorgan’s top-tier position in U.S. consumer lending—covering credit cards, mortgages and auto loans—further highlights its unmatched scale. The acquisition of First Republic Bank during the 2023 banking turbulence was a masterstroke, bolstering JPMorgan’s wealth management division and lending capabilities while enhancing its already robust deposit base.
Strong Capital Position: JPMorgan has emerged as the most well-capitalized U.S. global systemically important bank (G-SIB). Some other leading names in the G-SIB are Bank of America BAC and Citigroup C.
JPMorgan’s Common Equity Tier 1 (CET1) ratio was 15.3% as of Sept. 30, 2024, up 100 basis points (bps) from the previous year. This growth comes even as U.S. regulators prepare to tighten capital requirements under Basel III standards.
S&P Global’s risk-adjusted capital ratio for JPMorgan was 10.4% as of mid-2024, ensuring the bank remains well-positioned to meet regulatory expectations and weather potential market disruptions.
Exceptional Profitability and Resilience: JPMorgan’s earnings power is another crucial factor behind the ratings upgrade. With annual profits of around $50 billion in 2021 and 2023, the bank is among the most profitable institutions globally. Its ability to generate earnings equivalent to more than 200 bps of regulatory risk-weighted assets demonstrates its capacity to absorb shocks and build capital.
Even with expectations of a slight profitability decline in 2025 due to moderating net interest income (NII) and rising provisions, its diversified revenue streams—especially from capital markets and wealth management—are projected to support robust financial results. On the other hand, BAC and C are expected to record a rise in NII next year as interest rates come down.
Asset Quality Remains Strong: Despite a challenging macroeconomic environment, JPMorgan’s credit quality remains solid. Consumer portfolios, such as credit cards (16% of total loans), are expected to see only a modest increase in net charge-offs (NCOs). The company expects the NCO rate in credit cards to rise to 3.5% in 2024, up from 2.45% in 2023. Yet, it is below industry averages.
In the commercial real estate (CRE) sector, JPMorgan has a prudent approach, with office loans making up just 1% of total loans and a focus on multifamily housing for medium- to lower-income groups, which has shown minimal stress.
Deposit Base Leadership: JPMorgan's deposit base grew 4% from 2022 to the third quarter of 2024, reaching $2.43 trillion. This solidifies its position as the No. 1 retail deposit holder in the United States. The growth is in contrast with peers, many of whom saw stagnation or declines in deposits during the same period.
JPM’s liquidity position is also notable, with $1.5 trillion in high-quality liquid assets and unencumbered marketable securities, accounting for 35% of total assets—significantly higher than most peers.
Management Excellence and Strategic Investments: Under the leadership of CEO Jamie Dimon, JPMorgan has demonstrated exceptional agility in navigating challenges, including rising interest rates and regulatory complexities. Its superior management of unrealized losses—kept at just 3% of its securities portfolio as of Sept. 30, 2024—underscores its robust risk management.
Moreover, JPMorgan’s commitment to technology and artificial intelligence has positioned it for long-term growth. These investments not only support future profitability but also enhance operational efficiency and risk mitigation capabilities. For 2024, the company expects to spend almost $17 billion for upgrading technology.
Regulatory Landscape and Prospects: The stability of U.S. banking regulations remains an important consideration for S&P Global. While the outcome of the 2024 U.S. election could reduce the likelihood of stringent new regulations, JPMorgan’s compliance history and operational resilience ensure it is well-prepared for regulatory developments.
Parting Thoughts on JPMorgan
JPMorgan’s ratings upgrade by S&P Global is a resounding endorsement of its market leadership, financial strength and operational resilience. With a solid foundation in capital adequacy, profitability and strategic diversification, it continues to set benchmarks in the global financial industry.
So far this year, shares of JPM have surged 44.2%, outperforming the industry’s growth of 43.6%.
Image Source: Zacks Investment Research
Currently, JPMorgan carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
