Bank stocks are down this year. The KBW Nasdaq Bank Index, which tracks the performance of the largest U.S. banks, is down by roughly 9% year to date (YTD).
The largest U.S. bank, JPMorgan Chase (NYSE: JPM), has lagged the index, down roughly 10.6% YTD. It is an unusual place for JPMorgan Chase, as it has consistently outperformed its peers across most of the past two decades.
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There are a few factors to be aware of that are driving the underperformance. However, the stock is trading at a discount. So should you buy the stock before JPMorgan Chase reports first-quarter earnings on April 14?
One of the reasons that JPMorgan Chase, along with the other megabanks, has lagged the index is because of concerns about new capital requirements. The requirements call for banks with more than $250 billion in assets to increase their liquidity to navigate any shocks or downturns.
But earlier this month, Michelle Bowman, the Federal Reserve’s vice chair for supervision, said federal regulators were planning to scale back the previous requirements and mandate just a small increase, similar to what banks in the U.K. face.
For perspective, according to Basel III requirements for bank capital adequacy, a minimum Tier 1 Capital Ratio at 6% was set, thereby requiring banks to maintain a stronger core capital base to better absorb financial shocks and enhance overall stability in the banking system.
That’s an important adjustment because the former requirements would be stricter than what’s faced overseas and could put U.S. banks at a disadvantage. Further, Bowman said regulators are negotiating a decrease in global systemically important bank (G-SIB) surcharges. Combined, these proposals would decrease the requirements for large banks, and that would alleviate some investor concerns.
There are other concerns to watch for, too. One is a $5 billion lawsuit filed by the Trump Administration against JPMorgan Chase for debanking President Donald Trump and related entities for what it views as political reasons following the January 2021 riots. JPMorgan Chase officials have said the suit has “no merit,” but it has weighed on investor sentiment.
Further, JPMorgan Chase stock has dropped because of guidance that called for $105 billion in spending in 2026 — 10% higher than 2025 and more than analysts anticipated. A lot of that is going to updating technology and integrating artificial intelligence (AI) systems across the company.
