Is JPMorgan Stock Viable Investment After 11.6% Decline in March?

March is turning out to be a brutal month for the stock markets, and the largest American lender, JPMorgan’s JPM shares have taken a hit amid a broader market sell-off. The stock is down 11.6% this month and has significantly underperformed the Zacks S&P 500 composite, which has fallen 4.7%.Meanwhile, its industry peers, Wells Fargo WFC, lost 9.5%, and Bank of America BAC declined 10.1% so far this month.JPM’s Price Performance in March Image Source: Zacks Investment ResearchThe recent market slump is largely because of the ongoing tariff war, as President Trump’s tariffs have led to retaliation, raising concerns of a full-scale trade war. Also, economic data indicates a slowdown in the U.S. economy, with manufacturing and business activity stalling, job growth weakening and consumer confidence declining. Inflationary pressures are mounting, too, with consumer inflation expectations rising. These factors have heightened the risk of recession in the near term, which further aggravated the downturn.JPMorgan: A Case for Rates to Remain Higher for LongerAmid the troubling macroeconomic data, market participants are now predicting three interest rate cuts this year. Nonetheless, in a March 7 speech, Federal Reserve chairman Jerome Powell stated that the rates are likely to remain steady in the near term as the Fed officials wait for clarification on Trump’s trade policies. Powell said, “We do not need to be in a hurry, and are well positioned to wait for greater clarity.”Hence, interest rates are expected to remain higher for longer, and JPMorgan stands to gain from this. The company’s net interest income (NII) witnessed a five-year (ended 2024) CAGR of 10.1%, mainly driven by the high-interest rate regime since 2022 and the acquisition of First Republic Bank in 2023. Management expects NII to trough by mid-2025 and rise thereafter on the assumptions of one rate cut and decent balance sheet growth. As such, the company anticipates 2025 NII to be almost $94 billion compared with $93 billion reported in 2024.Resurging Capital Markets to Support JPM in the Long RunJPMorgan’s capital markets business (that includes investment banking or IB and markets) has been witnessing a robust comeback. Last year, investment banking fees (in the Commercial & Investment Bank segment) jumped 37% year over year after declining 5% in 2023 and 59% in 2022. Likewise, as trading volume and market volatility remained high in 2024, markets revenues benefited and grew 7%. JPMorgan is optimistic about the performance of the trading business going forward. It expects Markets to add approximately $4 billion to firm-wide NII this year compared with just $1 billion generated in 2024.Additionally, at the Bank of America Financial Services Conference on Feb. 11, JPMorgan’s chief operating officer, Jennifer Piepszak, provided a sneak peek into how the capital markets business is expected to perform in the first quarter of 2025. Discussing markets revenues, she noted that momentum “has continued into the first quarter.” The metric is expected to be up in low double digits on a year-over-year basis.Further, Piepszak stated that IB fees in the first quarter will grow in the mid-teens range year over year. This is expected to be driven by “healthy” equity markets and debt issuances and the resurgence in IPOs. Further, mergers and acquisitions “will take some time to play out” but the company remains optimistic about the advisory business being a “tailwind” throughout the year.But since then, the macroeconomic landscape has shifted dramatically, with uncertainty and market volatility likely to hinder significant near-term growth in the IB business. Despite these challenges, the long-term outlook for the IB business remains strong.Opportunistic Acquisitions & JPM’s Other Expansion EffortsJPMorgan has been growing through on-bolt acquisitions, both domestic and global. In 2023, the company increased its stake in Brazil's C6 Bank to 46% from 40%, allied with Cleareye.ai (a financial technology firm focused on trade finance) and acquired Aumni. Also, the company acquired the failed First Republic Bank in 2023. The deal continues to benefit JPM’s financials and even helped it reach record profits. Additionally, in 2022, it acquired Renovite and a 49% stake in Greece-based Viva Wallet and Global Shares. These deals, along with several others, are expected to support the bank's plan to diversify revenues and expand the fee income product suite and consumer bank digitally.In February 2024, JPM announced plans to open more than 500 branches and renovate roughly 1,700 locations by 2027-end. Of the total branches to be opened, 150 were built last year. As of Dec. 31, 2024, it had more than 4,950 branches across all 48 states in the United States. JPMorgan actively seeks to expand its digital retail bank – Chase – across the European Union countries after launching it in the U.K. in 2021. The company is focused on bolstering its IB and asset management businesses in China.JPMorgan’s Fortress Balance Sheet and Solid LiquidityAs of Dec. 31, 2024, JPM had a total debt worth $750.1 billion. The company's cash and due from banks and deposits with banks were $469.3 billion on the same date. The company maintains long-term issuer ratings A-/AA-/A1 ratings from Standard and Poor’s, Fitch Ratings and Moody’s Investors Service, respectively.Hence, JPM continues to reward shareholders handsomely. After clearing the 2024 stress test, the company increased its quarterly dividend by 8.7% to $1.25 per share in September. In February 2024, the company announced a 9.5% hike in quarterly dividends, which followed a 5% increase in 2023. In the last five years, it hiked dividends four times, with an annualized growth rate of 6.03%. Currently, the company's payout ratio is 27% of earnings.The company also authorized a new share repurchase program of $30 billion, effective July 1, 2024. As of Dec. 31, 2024, almost $19 billion in authorization remained available.Elevated Mortgage Rates to Hurt JPM’s Mortgage BusinessAs mortgage rates remained high in 2022 and 2023, JPMorgan’s mortgage fees and related income performance turned dismal. With the demand for mortgage loans and refinancing declining, the metric recorded a negative CAGR of 13.6% over the three years ended 2024. Though the trend reversed in 2024, origination volumes and refinancing activities are less likely to witness solid improvement as mortgage rates are expected to remain on the higher side. Per the February 2025 commentary from the Fannie Mae Economic and Strategic Research Group, the mortgage rates are expected to be 6.6% by 2025-end, with significant volatility “as markets react to trade policy announcements, incoming economic data, and other fiscal policy changes.” Higher mortgage rates will undeniably take a toll on origination and refinancing volumes. Hence, JPMorgan’s mortgage fees and related income are less likely to record solid growth in the near term.JPMorgan’s Asset Quality SubduedJPMorgan’s asset quality has been deteriorating. While the company recorded negative provisions in 2021, a substantial jump in provisions was recorded in the years after that because of the worsening macroeconomic outlook. The metric surged 169% in 2022, 45.9% in 2023 and 14.9% in 2024. Likewise, net-charge offs grew 117.6% in 2023 and 39.1% in 2024. As the interest rates are less likely to come down substantially in the near term, it is expected to hurt the borrowers’ credit profile. The company remains vigilant about the effects of continuous high rates and quantitative tightening on its loan portfolio. Hence, the company’s asset quality is likely to remain weak.Recent Slide in JPM Stock Offers an Investment OpportunityEarnings estimates for JPMorgan for 2025 and 2026 have been revised upward over the past 30 days. The positive estimate revision depicts bullish sentiments for the stock.JPM’s Earnings Estimates Trend Image Source: Zacks Investment ResearchThe Zacks Consensus Estimate for JPM’s 2025 earnings implies an 8.2% fall year over year because of weakness in the mortgage banking business and higher non-interest expenses. Management anticipates non-interest expenses to be almost $95 billion this year, up from $91.1 billion in 2024. Also, weakening asset quality will hurt its financials.Meanwhile, 2026 earnings estimates indicate 7.5% growth. JPM's Earnings Estimates Image Source: Zacks Investment Research Find the latest earnings estimates and surprises on Zacks Earnings Calendar.Despite the recent sell-off in the stock, it appears slightly expensive relative to the industry. The stock is currently trading at the forward 12-month price/earnings (P/E) of 12.71X. This is above the industry’s 12.39X, reflecting a stretched valuation. Also, JPM stock is trading at a premium compared with its peers – BAC and WFC.Price-to-Earnings F12M Image Source: Zacks Investment ResearchInvestors must consider the decline in JPM’s earnings this year as well as its premium valuation and be vigilant about the NII trajectory and the pace of interest rate cuts. Nonetheless, JPMorgan’s leading position in several businesses, strategic plan to expand its footprint globally and CEO Jamie Dimon’s leadership gives the stock an edge over its peers. Its focus on building a solid deposit franchise and bolstering its loan book positions it well for future growth. Although JPMorgan is currently witnessing a downslide due to tough macroeconomic conditions, investors are likely to profit in the long run if they bet on this stock.JPM currently carries a Zacks Rank #2 (Buy). 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