JPMorgan Chase cut to Perform at Oppenheimer after post-election rally

Oppenheimer downgraded JPMorgan Chase (NYSE:JPM) to Perform from Outperform as the stock now roughly trades in line with the firm’s fair value after a post-election bank stock rally.

“While most of the industry should see a steady rise in net interest income, JPM has guided to lower NII and this is what consensus expects,” analyst Chris Kotowski wrote in a note to clients. “It is admittedly ‘in consensus’ but it is, for us, hard to imagine the stock outperforming, especially from this level, when its key revenue line is declining as others rise.”

Furthermore, it will be difficult to base investment decisions on the macro outlook, since that remains very uncertain. Other things to keep in mind, according to Kotowski: no one likes or trust banks; Trump is a populist, not a traditional conservative; Fed Vice Chair for Supervision Michael Barr was appointed to a four-year term in July 2022; and the removal of Lina Kahn as head of the FTC will likely lead to an M&A rebound.

As a result of those observations, Oppenheimer is bullish on the prospect of an M&A surge, but more cautious about widespread relief from capital and other regulatory burdens for most commercial banks.

Citigroup (C) is now Oppenheimer’s favorite stock because “it is the only remaining deep value stock in the group.” Other preferred stocks include Goldman Sachs (GS) and Jefferies Financial Group (JEF).

JPMorgan Chase (NYSE:JPM) stock slipped 0.3% in Wednesday premarket trading.

Kotowski’s Perform rating aligns with the SA Quant rating of Hold, and diverges from the average SA Analyst rating and the average Wall Street rating, both at Hold.

For a summary of Quant and SA Analyst views on JPMorgan (JPM), see its Virtual Analyst Report.