Wells Fargo upgrades JPMorgan Chase, says 'Goliath is winning' as uncertainty grows around banking

Published Mon, Mar 13 20236:38 AM EDT

JPMorgan Chase is a source of strength during an uncertain time for the banking sector, according to Wells Fargo. The firm upgraded JPMorgan to overweight from equal weight. Analyst Mike Mayo also raised his price target to $155 from $148, which implies 16% upside from Friday's close price. "JPM epitomizes our theme of 'Goliath is Winning,'" Mayo wrote in a client note on Monday. "[It] has excelled at both offense and defense over the past decade in which it has been gaining market share in all major business lines while optimizing its businesses, showing consistent earnings relative to other global banks, and creating a 'fortress balance sheet' (as defined by its CEO)." Mayo added that, since the 2008 financial crisis, JPMorgan Chase has effectively taken de-risking measures. These include raising its leverage by almost a third, increasing its liquidity by more than an estimated 50% and lowering its losses. The analyst also thinks that the company's "multi-channel, multi-product and multi-geographical approach" has previously helped it excel when other financial firms were facing issues. Wells Fargo estimates that the bank's operating leverage should become positive in 2023 after two negative years, even as its investment spend remains elevated. To be sure, Mayo said that regulatory capital and other costs could challenge JPMorgan. He also noted that a slowing economy could further accelerate credit costs normalizing. Mayo's upgrade comes as investors worry about the health of the U.S. banking system. On Sunday, regulators unveiled a plan to guarantee Silicon Valley Bank clients their deposits after the bank failed last week. It was also announced Sunday that New York-based Signature Bank would be closed due to similar systemic contagion fears . JPMorgan shares were down more than 2% on Monday during premarket hours, as the broader banking sector took a hit. The stock has dipped 0.3% in 2023 amidst a 2.6% rise in the past 12 months. — CNBC's Michael Bloom contributed to this report.