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Fundamental View
AS OF 28 May 2025SBUX operates and licenses Starbucks cafe locations. Management has historically targeted lease-adjusted leverage of under 3x and has expressed support for the current, high-BBB ratings profile.
Recent results showed headwinds from lower traffic across the company’s locations in the U.S. and weak results in its second-largest market, China, due to increased competition in the market and cautious consumer behavior in the region.
SBUX navigated a volatile 2024, which included activist investments and an abrupt CEO change. While new CEO Brian Niccol is an experienced restaurant operator, we have reservations about the company’s restaurant reimaging plans.
Business Description
AS OF 28 May 2025- SBUX is a leading coffee roaster and retailer. The company operates and licenses over 40,000 Starbucks locations worldwide where it sells premium coffee beverages as well as other specialty drinks and prepared foods. Slightly over half the locations are company operated (52%) and the rest are licensed to third party operators.
- In F2024, SBUX generated $36.2 bn in revenue and $7.0 bn in adjusted EBITDA. SBUX has three reporting segments: N. America (75% of F2024 revenue), which covers cafes in the U.S. and Canada; International (20%), which includes China, Japan, Latin America, and EMEA; and Channel Development (4.9%) which includes revenue from other branded products sold outside retail locations through partnerships with large consumer companies such as Nestle and PepsiCo.
- On a geographic basis, SBUX's two largest regions are the U.S. (42% of cafes), and China (19%).
Risk & Catalysts
AS OF 28 May 2025In response to the activist attacks, SBUX announced an unexpected change in CEO and hired Brian Niccol, a veteran of the quick service restaurant industry with a successful track record at Taco Bell and Chipotle.
Lower discretionary spending in the U.S. could continue to weigh on SBUX’s sales outlook. We view its premium-priced beverage offerings as having significant risk of consumer trade down into more value-oriented options.
Investments behind the company’s new store imaging have increased costs and weighed on margins, in large part due to significant investments in labor.
Key Metric
AS OF 28 May 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 2Q25 |
|---|---|---|---|---|---|
| Revenue | 29,061 | 32,250 | 35,976 | 36,176 | 36,347 |
| EBITDA | 6,775 | 6,385 | 7,252 | 7,001 | 6,340 |
| EBITDA Margin | 23.3% | 19.8% | 20.2% | 19.4% | 17.4% |
| EBITDA-Capex to Revenue | 18.3% | 14.1% | 13.7% | 11.7% | 9.7% |
| Total Debt | 14,616 | 15,044 | 15,400 | 15,568 | 15,572 |
| Net Debt | 8,160 | 12,226 | 11,848 | 12,282 | 12,900 |
| Net Leverage | 1.2x | 1.9x | 1.6x | 1.8x | 2.0x |
| Lease Adjusted Debt to EBITDAR | 2.9x | 3.1x | 2.8x | 3.0x | 3.2x |
| EV / EBITDA | 20.4x | 17.1x | 16.1x | 17.6x | 19.6x |
CreditSight View Comment
AS OF 06 May 2025SBUX is in the early phases of an operational turnaround plan intent on reigniting foot traffic by improving the in-store experience. The “Back to Starbucks” program has come at the expense of margin due to heavy investments in labor. While the plan is ultimately to increase transactions and tickets due to improved experiences, we are skeptical that the company will be able to recoup the margin. Also, the strategy comes at a time when economic uncertainty could weigh on discretionary purchases. Also, recent results have weighed on the company’s share price, which could test the patience of equity investors and possibly draw activist attention to the name again. We recommend avoiding this risks in favor of McDonald’s bonds, despite ~20 bp of incremental spreads at SBUX.
Recommendation Reviewed: May 06, 2025
Recommendation Changed: May 01, 2024
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Fundamental View
AS OF 28 May 2025Relative to food-oriented peers, KDP benefits from exposure to faster growing, higher margin beverage & coffee categories. However, coffee categories are exposed to underlying commodity swings.
Management has adopted a more conservative posture on leverage and reduced its target by half a turn to 2-2.5x for the near-term. The reduced leverage target implies roughly a full turn of improvement from current levels in the mid-3x area.
Despite the current emphasis on leverage reduction, management has maintained that M&A remains a longer-term priority. Still, we are comfortable with KDP credit and favor taking on any spread pickup opportunities over F&B peers.
Business Description
AS OF 28 May 2025- KDP is the result of a July 2018 merger between Dr Pepper Snapple and Keurig Green Mountain. The merger combined a traditional soft drinks company (DPS) with a faster growing coffee platform that includes the market's leading single serve brewing system.
- The merger was backed by JAB Holdings via its affiliate, Maple Holdings BV. While JAB has trimmed its stake in recent periods, it still controls ~16% of the shares.
- KDP recorded $15.4 bn in 2024 net sales with adjusted EBITDA of $4.5 bn. The business is heavily concentrated in North America, and results are reported across three operating segments: U.S. Refreshment Beverages (61% of 2024 sales), U.S. Coffee (26% of sales), and International (13.0% of sales).
- Examples of KDP's key brands include Dr Pepper, Keurig, Snapple, Canada Dry, 7Up, Mott's, and A&W. The company also partners with other leading coffee brands from various producers via licensing and manufacturing agreements for K-cups.
Risk & Catalysts
AS OF 28 May 2025Management has historically guided to M&A as a key capital allocation priority, but recent deal activity has been biased toward bolt-on opportunities and management emphasized integrating recently purchased assets while bringing leverage down to the 2.5x area.
KDP has exposure to elevated input costs, particularly for green coffee beans. KDP took pricing in coffee, and is expecting some elasticity, but they plan to management to stable profit dollars, and could seek to raise prices further in 2025.
Given the increased value-seeking mindset of consumers, KDP could see a tradedown benefit if coffee prices rise across the board.
Key Metric
AS OF 28 May 2025| $ mn | Y21 | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|---|
| Revenue | 12,683 | 14,057 | 14,814 | 15,351 | 15,518 |
| EBITDA | 3,908 | 3,932 | 4,189 | 4,537 | 4,565 |
| EBITDA Margin | 30.8% | 28.0% | 28.3% | 29.6% | 29.4% |
| EBITDA-CAPEX-INT % of Revenues | 23.5% | 20.5% | 21.7% | 21.7% | 22.1% |
| Total Debt | 12,024 | 12,104 | 13,308 | 15,595 | 15,957 |
| Net Debt | 11,457 | 11,569 | 13,041 | 15,085 | 15,304 |
| Net Leverage | 2.9x | 2.9x | 3.1x | 3.3x | 3.4x |
| EV / EBITDA | 16.3x | 15.8x | 14.2x | 12.9x | 13.5x |
CreditSight View Comment
AS OF 28 Apr 2025As a beverage company KDP’s portfolio has resistant characteristics if we see greater economic weakness, but its Coffee Systems business does have exposure to discretionary spending and has seen some impacts from retailer inventory management actions and private label pressure. Also, the company is experiencing increased price elasticity in its coffee as is raises prices to offset underlying commodity inflation. On the plus side, KDP recently adopted a more conservative leverage target of 2-2.5x vs current levels in the mid-3x area. Management’s medium-to long-term capital allocation plan does consider strategic M&A, but we like that management has been less vocal about large M&A of late, and has also discussed asset disposals.
Recommendation Reviewed: April 28, 2025
Recommendation Changed: October 27, 2023
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Korea Electric Power Corp.
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Fundamental View
AS OF 28 May 2025Pfizer has ample financial resources, strong ability to de-lever, and sizeable M&A capacity at current ratings.
Pfizer faces meaningful losses of exclusivity come the middle part of the decade. Management has guided to a ~$17 bn negative revenue impact from patent losses in 2025-30, including for drugs such as Xeljanz (2025), Eliquis (2026), Ibrance (2027), and Xtandi (2027).
Management expects to offset this impact with growth from pipeline development (+$20 bn of revenues by 2030) and business development (+$25 bn of revenues by 2030).
Business Description
AS OF 28 May 2025- Pfizer is a research-based, global biopharma company with focuses in immunology, metabolic disease, oncology, vaccines, neuroscience, and rare disease.
- PFE has completed a number of major acquisitions and divestitures in recent years. In 2009, the company acquired Wyeth for $68 bn, increasing its size by approximately 50%. Subsequently, PFE completed the $17 bn acquisition of Hospira, ~$12 bn acquisition of Biohaven, ~$6 bn acquisition of Arena, ~$5 bn acquisition of GBT, ~$14 bn takeover of Medivation, ~$43 bn acquisition of Seagen and $6.3 bn divestiture of its remaining stake in Haleon.
- The company has also completed the sale of its Nutrition business to Nestle for $11.9 bn and the disposition of its animal health business, Zoetis. More recently, the company executed the separation of its Consumer and Upjohn businesses through distinct transactions.
Risk & Catalysts
AS OF 28 May 2025Pfizer has been active with portfolio repositioning, executing the separations of its Consumer Healthcare and Established Brands (Upjohn) businesses in recent years. These transactions have resulted in weaker diversification and greater exposure to patent expirations.
Due to upcoming patent losses, Pfizer has been extremely active with M&A. The company recently completed the $43 bn acquisition of Seagen, which resulted in well over a turn of leverage deterioration.
Pfizer is also exploring the sale of its hospital drugs unit. The unit was formed through the $17 bn acquisition of Hospira in 2015. We suspect that divestiture proceeds would be used primarily for business development.
Key Metric
AS OF 28 May 2025| $ mn | Y20 | Y21 | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|---|---|
| Revenue | 41,651 | 81,288 | 101,175 | 59,553 | 63,627 | 62,463 |
| Gross Profit | 33,167 | 50,467 | 66,831 | 34,599 | 45,776 | 45,146 |
| R&D | (8,709) | (10,360) | (11,428) | (10,679) | (10,822) | (10,532) |
| SG&A | (11,597) | (12,703) | (13,677) | (14,771) | (14,730) | (14,266) |
| Adj. EBITDA | 18,027 | 33,354 | 46,153 | 22,904 | 25,867 | 24,991 |
| Total Debt | 39,836 | 38,436 | 35,829 | 71,888 | 64,351 | 62,109 |
| Gross Leverage | 2.2x | 1.2x | 0.8x | 3.1x | 2.5x | 2.5x |
| Interest Coverage | 13.1x | 26.6x | 46.8x | 39.2x | 10.2x | 10.4x |
CreditSight View Comment
AS OF 27 May 2025We reiterate our Outperform recommendation on Pfizer. While we are less-than-impressed with Pfizer’s late-stage pipeline, we see the spread pickup over peers such as BMY (M/P) and MRK (U/P) as worthy of adding exposure given PFE’s financial flexibility.
Recommendation Reviewed: May 27, 2025
Recommendation Changed: January 05, 2024
Who We Recommend
Delta Air Lines
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Korea Electric Power Corp.
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Search topics about wealth insights and investments.Republic of Indonesia
- Bond: INDON 1.17 29
- Indicative Yield-to-Maturity (YTM): 1.569%
- Credit Rating : Baa2/BBB/BBB
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Country Overview
AS OF 28 May 2025- Indonesia is the world’s fourth-most populous nation and the largest economy in Southeast Asia
- The economy is diverse, with key sectors including manufacturing, agriculture, mining, and services.
- Indonesia is a significant producer of commodities like coal, palm oil, and natural gas.
Business Description
AS OF 28 May 2025Risk & Catalysts
AS OF 28 May 2025Who We Recommend
Delta Air Lines
Sultanate of Oman
Korea Electric Power Corp.
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Search topics about wealth insights and investments.Republic of Korea
- Bond: KOREA 5.625 25
- Indicative Yield-to-Maturity (YTM): 4.22%
- Credit Rating : ( Aa2 / AA / AA- )
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Country Overview
AS OF 28 May 2025- Highly Developed Mixed Economy: South Korea boasts a highly developed mixed economy, ranking as the 13th largest globally by nominal GDP and the 4th largest in Asia as of 2025, with a nominal GDP of approximately USD 1.950 trillion.
- Rapid Economic Development: The nation experienced a remarkable economic transformation known as the “Miracle on the Han River”, evolving from an underdeveloped country to a high-income, developed nation in a few decades.
- Global Leader in Key Industries: South Korea is a global leader in sectors such as electronics, telecommunications, automobile production, chemicals, shipbuilding, and steel, with significant investments in research and development (around 4.93% of GDP).
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Fundamental View
AS OF 28 May 2025Citigroup is a solid global money center bank that has done a decent job cleaning up legacy issues and fortifying the risk profile in the wake of the GFC, though it still lags peers on several fronts including profitability.
Citi has more geographic diversification than peers owing to its international presences, though the retail side is shrinking considerably as Citi exits most of Asia and Mexico, refocusing around a global wealth management/private bank strategy.
Citi lags on the domestic deposit front, with less than half of the deposit base of money center peers and a much smaller physical footprint, though it has been focused on driving deposit flows the past couple of years.
Business Description
AS OF 28 May 2025- Citigroup ranks as the 3rd largest U.S. bank by total assets ($2.57 tn) at 1Q25 and 3rd largest by Total Equity ($213 bn).
- Citi is 4th in terms of U.S. deposits with approximately $743 bn as of 1Q25 across 661 branches (S&P Capital IQ). Given the significantly smaller branch footprint, Citi does not generally possess leading market shares in most states besides South Dakota (#1).
- Citi's major business lines include U.S. consumer (mortgages and credit cards) and retail banking, global consumer, global corporate & investment banking, and global payments. The company is in the process of exiting 13 international consumer markets, refocusing the non-US footprint around four regional hubs and combining wealth management and the private bank to drive synergies out of the hubs.
Risk & Catalysts
AS OF 28 May 2025Citi still lags peers on profitability (both ROA and ROTCE); CEO Fraser adopted the profitability gap as a key focus point as well, and we see Fraser’s strategic moves (e.g. int’l consumer exits, headcount reduction in management layers) as aimed at capital and expense optimization to improve ROE.
While not as severe as a Wells-type situation, Citi’s regulatory mishaps introduce risks should the bank fail to show improvement in internal controls, or if another major risk management failure crops up. Our base case: Citi will be able to satisfy regulators and end up with improved infrastructure, though it will likely be a multi-year process with resultant upward cost pressures.
Citi’s global footprint makes it more exposed to emerging markets and non-domestic economies; in the near-term, that could create earnings and capital volatility to the degree tariff policies drive USD appreciation.
Key Metric
AS OF 28 May 2025| $ mn | FY21 | FY22 | FY23 | FY24 | LTM 1Q25 |
|---|---|---|---|---|---|
| ROAE (annual) | 10.9% | 7.5% | 4.5% | 6.1% | 6.4% |
| ROAA (annual) | 0.92% | 0.61% | 0.38% | 0.51% | 0.53% |
| PPNR / Avg. Assets | 1.02% | 0.97% | 3.93% | 3.56% | 3.86% |
| Efficiency Ratio | 68% | 67% | 272% | n/m | n/m |
| Net Interest Margin (Annual) | 1.94% | 2.20% | 2.37% | 2.29% | 2.29% |
| Net charge-offs (LTM) / Loans | 0.70% | 0.55% | 0.95% | 1.29% | 1.31% |
| Common Dividend Payout | 19% | 27% | 130% | n/m | n/m |
| CET1 Ratio | 12.3% | 13.0% | 13.4% | 13.6% | 13.4% |
| Supplementary Leverage Ratio (SLR) | 5.7% | 5.8% | 5.8% | 5.9% | 5.8% |
| Liquidity Coverage Ratio (LCR) | 115% | 118% | 116% | 117% | 117% |
CreditSight View Comment
AS OF 16 Jul 2025Citi’s Underperform recommendation is driven by a narrow spread range across the Big 6 peer group and what we see as more idiosyncratic risk heading in 2025. Even with recent widening, Citi is trading close to several peers we view as better-positioned fundamentally. However we’re comfortable with Citi as a credit and still believe in Fraser’s transformation efforts, but 2025 could be bumpy: Citi is more exposed to non-USD currencies than peers (stronger dollar hurts CTA), is looking to IPO Banamex at a time of rising Mexico/US tensions (and related FX impact), and management is trying to manage expenses to deliver on medium-term targets. In 2Q25 however tariff-driven uncertainty proved to be a positive driver of activity in a number of lines.
Recommendation Reviewed: July 16, 2025
Recommendation Changed: December 05, 2024
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Delta Air Lines
Sultanate of Oman
Korea Electric Power Corp.
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Fundamental View
AS OF 28 May 2025Goldman Sachs’ performance and market share in its core legacy businesses of investment banking and sales and trading have remained very solid, working through soft periods associated with rising rates; with market conditions improving into 2025 these businesses should continue to excel.
Goldman’s results have been weighed in recent years by costs associated with exiting the unsuccessful foray into various consumer banking businesses; such costs are largely in the rearview mirror. Wealth and Asset Management are now the most likely areas of growth in the coming years, where Goldman can leverage its strengths in HNW and alternative asset management.
Business Description
AS OF 28 May 2025- Goldman Sachs is now the fifth largest bank holding company in the U.S. with approximately $1.76 tn in assets as of 1Q25 and a market capitalization of $175.4 bn as of May 23rd, 2025.
- Goldman Sachs presents its activities through three business segments: Global Banking & Markets, Asset & Wealth Management, and Platform Solutions.
- Goldman's historical strengths include equity and FICC sales & trading, investment banking, institutional investment management including alternatives, and high net worth wealth management. It has been expanding its wealth management client base, and adding other stable fee income streams amid a sluggish capital market environment. 5
Risk & Catalysts
AS OF 28 May 2025The early 2020’s were a mixed bag– the foray into consumer lending was costly and ultimately was reversed, diverting capital and management attention and providing a meaningful drag on profitability. Goldman has re-focused on its core businesses, though its profile will remain less diversified than large GSIB peers.
Goldman could participate in further M&A to achieve its long-term strategic goals, most likely through add-on deals related to asset/wealth management.
Goldman could be impacted by various risks during periods of market turmoil, but for the most part, has been positively impacted by bouts of volatility which tend to spur more client trading activity– 2025 tariff risks being a recent example. Goldman is subject to significant market and counterparty risks as reflected in the DFAST/SCB regime.
Key Metric
AS OF 28 May 2025| $ mn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| ROAE (annual) | 21.3% | 9.7% | 7.3% | 12.0% | 12.3% |
| ROAA (annual) | 1.5% | 0.7% | 0.5% | 0.8% | 0.9% |
| PPNR / Avg. Assets | 1.86% | 1.08% | 3.29% | 3.92% | 1.16% |
| Efficiency Ratio | 54% | 65% | 282% | 266% | 63% |
| Net charge-offs (LTM) / Loans | 0.19% | 0.30% | 0.68% | 0.61% | 0.61% |
| Common Dividend Payout | 10.6% | 28.4% | 158.9% | 129.4% | 25.9% |
| CET1 Ratio | 13.6% | 15.0% | 14.4% | 15.0% | 14.8% |
| Supplementary Leverage Ratio (SLR) | 5.5% | 5.8% | 5.5% | 5.5% | 5.5% |
| Liquidity Coverage Ratio (LCR) | 122% | 129% | 128% | 126% | 126% |
CreditSight View Comment
AS OF 17 Jul 2025We maintain our Market perform recommendation for Goldman Sachs; we remain quite comfortable with the name fundamentally but see better value at JPMorgan and Wells Fargo among money center banks, particularly in the context of our shift to a more defensive stance across the sector. Goldman should be back to a normal pace of issuance so technicals should not be quite as much of a tailwind going forward as they had been in 2023 and early 2024, though the fundamental picture continues to improve with improved capital markets conditions as well as reduced drag from exited businesses. Market conditions thus far have aligned well with Goldman’s strengths in trading, and investment banking is showing signs of picking up as advisory and ECM improved in 2Q.
Recommendation Reviewed: July 17, 2025
Recommendation Changed: January 12, 2022
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Sultanate of Oman
Korea Electric Power Corp.
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Search topics about wealth insights and investments.HCA Healthcare
- Bond: HCA 5.25 30
- Indicative Yield-to-Maturity (YTM): 5.013%
- Credit Rating : BBB
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Fundamental View
AS OF 28 May 2025HCA’s volume metrics and EBITDA margins consistently best industry peers, primarily due to strong operational efficiency and an inpatient/outpatient focus within large, healthy markets.
HCA’s credit metrics have improved in recent years and leverage sits near the low end of management’s target net leverage range of 2.75-3.75x.
HCA benefits from substantial financial flexibility provided by strong FCF generation and easy access to the capital markets. The company also maintains sufficient liquidity with a well-laddered maturity schedule.
Business Description
AS OF 28 May 2025- HCA operates more than 190 hospitals with ~50k beds and 125 freestanding surgery units (as of 1Q25). The company operates in 20 states and England, but ~50% of its hospitals are located in Texas and Florida. HCA is the largest for-profit hospital operator in the US by revenue. HCA also purchased 41 urgent care centers in Texas from FastMed for an undisclosed amount.
- HCA has gone private twice since its initial public offering in 1969, most recently in 2006. During periods of private ownership the company has engaged in debt-financed special dividends. HCA returned to public ownership in 2011.
- HCA has been an active consolidator in the industry, acquiring General Health Services, Columbia Healthcare, Hospital Affiliates, and Healthcare Corp, among others. In rationalizing its offering of services and market focus, HCA has sold or spun-off hospital groups such as LifePoint, Triad, and HealthTrust.
Risk & Catalysts
AS OF 28 May 2025We see some risk of choppy operating performance tied to an unwind of acuity and payor mix benefits experienced through COVID.
HCA guides to FY25 revenue growth of ~5% and adjusted EBITDA growth of ~6%. Management reported an 9% YoY decline in 1Q25 contract labor costs and with expectations of this trend to continue through FY25.
HCA maintains the flexibility to manage to target leverage levels. Net leverage totaled 3.1x at 1Q25. Management updated its net leverage target to 2.75-3.75x (from 3-4x previously).
HCA’s board recently authorized an additional $10 bn share repurchase program (with a significant portion expected to be completed in FY25).
Key Metric
AS OF 28 May 2025| $ mn | Y20 | Y21 | Y22 | Y23 | Y24 | LTM 1Q25 |
|---|---|---|---|---|---|---|
| Revenue | 51,533 | 58,752 | 60,233 | 64,968 | 70,603 | 71,585 |
| SWB | 23,874 | 26,779 | 27,685 | 29,487 | 31,170 | 31,460 |
| Supplies | 8,369 | 9,481 | 9,371 | 9,902 | 10,755 | 10,848 |
| Adj. EBITDA | 10,037 | 12,644 | 12,067 | 12,726 | 13,882 | 14,262 |
| Total Debt | 31,004 | 34,579 | 38,084 | 39,593 | 43,031 | 44,576 |
| Gross Leverage | 3.1x | 2.7x | 3.2x | 3.1x | 3.1x | 3.1x |
| Interest Coverage | 6.2x | 8.4x | 7.3x | 6.7x | 7.2x | 7.4x |
CreditSight View Comment
AS OF 04 Jul 2025We maintain an Outperform recommendation on HCA. HCA remains the strongest hospital operator in the for-profit space, exhibiting operational stability and strong FCF generation. These strengths should help the company weather any tariff- or policy-related headwinds. We see HCA as a good alternative to some of the widest BBB-rated credits in our IG Pharma universe, namely Biogen and Viatris.
Recommendation Reviewed: July 04, 2025
Recommendation Changed: May 02, 2018
Who We Recommend
Delta Air Lines
Sultanate of Oman
Korea Electric Power Corp.
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Fundamental View
AS OF 28 May 2025JPMorgan is one of the strongest and best positioned banks to navigate the current environment, with a well-diversified business model and good competitive positioning across a variety of lending and capital markets areas.
The company continues to deploy its considerable earnings power into reinvestment, specifically around technology where we are bullish on its ability to drive competitive advantages through strategic enhancements and efficiency gains.
Business Description
AS OF 28 May 2025- JPMorgan ranks as the largest U.S. bank by total assets ($4.4 tn at 1Q25) and deposits ($2.49 tn at 1Q25).
- JPMorgan ranks 1st in terms of U.S. deposits with approximately $2.08 tn in deposits at YE24 across 4,970 branches (S&P Capital IQ). JPMorgan's footprint includes New York (#1), Texas (#1), California (#2), Illinois (#1), Michigan (#1), Arizona (#1), Ohio (#5), and Florida (#4), among others.
- JPMorgan's major business lines include investment banking, retail banking, card services, treasury & securities services, commercial banking, and asset & wealth management.
Risk & Catalysts
AS OF 28 May 2025Succession planning at JPMorgan has a higher profile than many peers, with CEO Dimon (68 year-old) having held the top spot for over 15 years. Another recent round of shuffling top management yielded a little clarity, with Jennifer Piepszak taking herself out of the running and moving into the COO seat, with remaining candidates including Marianne Lake (CEO of Consumer), Troy Rohrbaugh (CEO of Commercial/Investment Bank), and Mary Erdoes (CEO of Asset/Wealth Management).
The sector remains exposed to reputational, legislative/administrative risk, and cyber threats, although the significant tech spend over the past few years should (theoretically) result in a stronger position for JPM to manage the security threats.
Although not likely a credit risk, JPMorgan may continue to be acquisitive around non-bank financial and ancillary services; but we would expect any deal to be conservatively funded and looking to further technology and fee income strategies (e.g. payments or asset management).
Key Metric
AS OF 28 May 2025| $ mn | FY21 | FY22 | FY23 | FY24 | 1Q25 |
|---|---|---|---|---|---|
| ROAE (annual) | 17.0% | 13.2% | 16.0% | 17.4% | 17.5% |
| ROAA (annual) | 1.3% | 1.0% | 1.3% | 1.4% | 1.4% |
| PPNR / Avg. Assets | 1.32% | 1.39% | 7.06% | n/m | 2.08% |
| Efficiency Ratio | 59% | 58% | 214% | n/m | 53% |
| Net Interest Margin (Annual) | 1.63% | 2.00% | 2.70% | 2.63% | 2.60% |
| Net charge-offs (LTM) / Loans | 0.26% | 0.25% | 0.48% | 0.63% | 0.65% |
| Common Dividend Payout | 24% | 32% | 101% | n/m | 24% |
| CET1 Ratio | 13.1% | 13.2% | 15.0% | 15.7% | 15.4% |
| Supplementary Leverage Ratio (SLR) | 5.4% | 5.6% | 6.1% | 6.1% | 6.0% |
| Liquidity Coverage Ratio (LCR) | 110% | 110% | 113% | 113% | 113% |
CreditSight View Comment
AS OF 16 Jul 2025Our Outperform view on JPM is all about defensive value: rightfully perceived as the industry bellwether, spread differentials among Big 6 peers have collapsed with investors now able to rotate into highest quality with only a nominal spread sacrifice. Defensive value has become more important given extreme policy uncertainty and we continue to like the value in JPM even after recent widening across IG and the bank peer group. Technicals may be mildly supportive, with larger JPM facing ~$25 bn in maturities/calls in FY25, below BAC with peer banks in the $21-22 bn range. Core credit strengths including capitalization may slide with the BISIII softening and delay, but from an extremely strong starting point.
Recommendation Reviewed: July 16, 2025
Recommendation Changed: December 05, 2024
Who We Recommend
Delta Air Lines
Sultanate of Oman
Korea Electric Power Corp.
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Fundamental View
AS OF 27 May 2025Nissan unveiled their second strategic plan in as many years, with the Re: Nissan Recovery Plan under new CEO Ivan Espinosa focused on sweeping changes to the company’s manufacturing footprint and cost structure. We believe the plan comes with a high degree of execution risk considering execution has been a major organizational weakness in recent years. Lacking in the recovery plan, in our view, was updated details of its hybrid vehicle development and introduction targets, which would address a hole in its product lineup in a fast-growing global segment. While we are hopeful the Re: Nissan Recovery Plan succeeds, and we will be rooting for management to flawlessly execute the plan, we view currently view the plan as a “show me” story until we gain confidence in their ability to execute.
Business Description
AS OF 27 May 2025- Nissan, with headquarters in Yokohama, Japan, is a leading global automotive manufacturer with a market presence in many countries around the globe. The company’s growth investments are focused primarily on Japan, North America, and China, core markets with large profit pools in which Nissan has a meaningful market share. The company’s business in China is conducted through a joint venture with Dongfeng Motor Corporation.
- Nissan’s Sales Financing segment supports the sale of its vehicles by providing financing solutions to its customers and dealers. To enhance their creditworthiness, Nissan maintains keepwell (support) agreements with its wholly owned financial subsidiaries including Nissan Motor Acceptance Corporation (NMAC) in the United States and Nissan Financial Services (NFS) in Japan.
- The Renault-Nissan-Mitsubishi Alliance was established in 1999 to enhance member company scale in product development and raw material purchasing. The alliance includes equity participation, which led to Nissan holding ownership stakes in Renault (15% non-voting) and Mitsubishi (34%) and Renault holding an ownership stake in Nissan (43%). The Alliance’s automobile production volume is the third largest globally behind Toyota and Volkswagen.
Risk & Catalysts
AS OF 27 May 2025Management provided FY25 guidance for production volumes, retail sales, and consolidated operating profit, noting the guidance excludes tariff impacts. However, it noted its guidance for operating profit, net income, and automotive free cash flow is preliminary owing to uncertainty related to the potential impact of tariffs and additional restructuring costs that are currently being assessed. More broadly, the company is viewing FY25 as a year of transition that will set the stage for achieving positive automotive operating profit and free cash flow by FY26.
The company expects to produce and sell 3% fewer vehicles in FY25 than it did in FY24. The retail sales decline expectation is driven by lower projected sales in China, which management expects to decline by about 18%. Global production volume is expected to decline to 3.0 mn units to manage dealer inventories based on the company’s lower retail sales outlook. The company expects revenue to decrease 1% in FY25 as lower volumes are partially offset by improved sales incentive management and favorable pricing related to new model launches in 2H25.
Key Metric
AS OF 27 May 2025| JPY bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Revenue | 6,843 | 7,393 | 9,573 | 11,524 | 11,371 |
| EBIT | (471) | (42) | 242 | 409 | (54) |
| EBIT Margin | (7%) | (1%) | 3% | 4% | (0%) |
| EBITDA | (201) | 247 | 559 | 760 | 309 |
| EBITDA Margin | (2.9%) | 3.3% | 5.8% | 6.6% | 2.7% |
| Total Liquidity | 4,096 | 3,601 | 3,658 | 4,196 | 4,272 |
| Net Debt | (636) | (728) | (1,213) | (1,546) | (1,499) |
| Total Debt | 1,260 | 973 | 687 | 468 | 661 |
| Gross Leverage | n/m | 3.9x | 1.2x | 0.6x | 2.1x |
| Net Leverage | 3.2x | -2.9x | -2.2x | -2.0x | -4.8x |
CreditSight View Comment
AS OF 16 Jul 2025Our Market perform recommendation on Nissan Motor Co and Nissan Motor Acceptance Corp notes is based on relative value and expected Re: Nissan cost savings initiatives, partially offset by tariff cost headwinds and continuing sluggish retail sales trends.
Recommendation Reviewed: July 16, 2025
Recommendation Changed: July 16, 2025
Who We Recommend
Delta Air Lines
Sultanate of Oman
Korea Electric Power Corp.