Top banking analyst Mike Mayo just slashed his rating on JPMorgan on Friday after the major bank posted disappointing quarterly results. Wells Fargo's Mayo downgraded JPMorgan to an equal weight rating from overweight. He also cut his earnings estimate by about 15% for the annual periods from 2022 to 2025. "This issue is certain to us: front-loaded spending for less certain back-ended benefits," Mayo said in the note. "JPM continues to reflect our 'Goliath is Winning' theme, but the cost and time frame for doing so is greater and longer than expected. Indeed, there was zero assurance that this historic increase in expenses will level off after this year." Shares of JPMorgan dropped 6.2% on Friday, dragging down the major equity averages. The sell-off came after the firm posted its smallest quarterly earnings beat in nearly two years and the lender's CFO lowered guidance on companywide returns. CFO Jeremy Barnum said on a conference call that management expected "headwinds" of higher expenses and moderating Wall Street revenue. Mayo's price target for JPMorgan was also slashed to $180 per share from $210 a share. The stock traded around $157 apiece Friday. The analyst pointed out that JPMorgan guided for 8% higher expenses in 2022 due to inflation and deliberate increases in investments, implying a second year in a row of negative operating leverage. "Good long-term company, but perhaps too long of a horizon for bank stock investors, especially without more detail," Mayo said. "We feel that the burden is on JPM to give more specifics about its expected benets since they are incurring certain expenses for uncertain benefits."
