A sea change is defined as a notable or profound transformation.
The expression's origins date back to Shakespeare's The Tempest and originally referred to a change brought about by the sea.
The term's meaning has expanded since then, and, among other things, it is being used to describe the potential impact of the Basel III Endgame, an international regulatory accord designed to improve the regulation, supervision, and risk management of the banking sector.
Related: Analyst updates SoFi stock outlook after earnings
A report by the accounting firm EY released in September said, "B3E represents a sea change for the US banking industry, significantly altering the regulatory capital regime for US banks.”
"The proposal would modify how the largest US banks think about regulatory capital and extends more granular, rigorous requirements to US regional and midsized banks," the report said.
The B3E US Notice for Proposed Rulemaking “ proposes updates to the regulatory capital rules that would bring dramatic changes to the current US risk-based capital framework,” the EY report said.
The rules present new risks and opportunities for banks, including JP Morgan
CEO Jamie Dimon: 'We're earning a lot of money'
The compliance date is July 1, 2025, and U.S. banks will have to interpret the new rule, address new data and technology needs, and adjust business models.
TheStreet Pro’s Chris Versace wrote on May 10 that “while exact changes are still being formulated, reports indicate officials may release as soon as next week data from banks detailing how the changes could affect aspects of their businesses.”
Related: GameStop rockets, pounding short sellers, as 'Roaring Kitty' returns
The Basel III Endgame was among the many topics discussed during JP Morgan Chase's JPM first-quarter earnings call last month.
JP Morgan Chase posted first-quarter earnings of $4.44 per share, driven by its takeover of First Republic during last year's regional banking crisis.
Chief Financial Officer Jeremy Barnum told analysts that First Republic contributed $1.7 billion in revenue, $806 million in expenses, and $668 million in net income in the quarter.
Analysts surveyed by LSEG estimate expected the bank to earn $4.11 per share.
Revenue totaled $42.55 billion due to higher rates and larger loan balances, exceeding Wall Street’s call for $41.85 billion.
Barnum said the bank ended the quarter with a Common Equity Tier 1 Capital, or CET1, ratio of 15%, relatively flat compared with the prior quarter, reflecting net income, which was predominantly offset by higher risk-weighted assets and capital distribution.
CET1 is the main component of Tier 1 capital and represents the strongest form of capital, which can be quickly liquidated to absorb unexpected losses.
In January, the financial institution posted fourth-quarter earnings of $3.04 per share on revenue of $38.6 billion. Analysts had predicted earnings of $3.35 a share on revenue of $39.7 billion.
JP Morgan said it expected 2024 net interest income of around $90 billion, essentially unchanged from its previous forecast.
"So we're earning a lot of money," CEO Jamie Dimon told analysts. "Our capital cup runneth over, and that's why we increased the dividend. And if you ask me what we'd like to do is to pay out something like 1/3 of normalized earnings."
Analyst says JP Morgan has 'ample excess capital'
Dimon said that the CET1 ratio of 15% "basically will prepare us for the total Basel endgame today roughly."
"The specifics don't matter that much," he said. "Remember, we can do a lot of things to change that in the short run or the long run. But -- and it looks like Basel III endgame may not be the worst case, it will be something less than that."
More Wall Street Analysts:
- Analyst unveils new Nike price target ahead of big summer for sports
- Analysts weigh in on Google-parent Alphabet’s stock after cloud event
- Analysts revamp Disney stock price target after proxy fight
JP Morgan Chase's investor day is scheduled for May 20, and some analysts adjusted their stock prices ahead of the annual event.
Jefferies analyst Ken Usdin raised the firm's price target on JPMorgan to $227 from $215 and kept a buy rating on the shares.
In a preview note, the analyst told investors that the firm expects to focus on market share gains, investment spending, and efficiency at JPMorgan's investor day.
Usdin noted that CET1 and Return on Average Tangible Common Shareholders' Equity (ROTCE) targets will unlikely be updated until Basel 3 endgame rules are finalized.
Usdin said he believes that JPMorgan has "ample excess capital and can sustain best-in-class returns regardless of the outcome."
Deutsche Bank analyst Matt O’Connor maintained his buy rating on JPMorgan and his $215 price target.
O’Connor told investors that JPMorgan shares are 17% year-to-date, compared with the S&P 500 and KBW Nasdaq Bank Index, which are both up 10%.
“The outperformance is likely due to JPM benefitting from a higher-for-longer rate environment given JPM's asset sensitive balance sheet positioning as well as a general investor preference for mega-bank stocks (over regional banks),” O’Connor said.
The analyst said that he maintains his buy rating on the bank “as shares should continue to benefit from upside to net interest income guidance, good leverage to a pick up in capital markets revenues, and an acceleration in share buybacks.”
"And, if macro/market conditions turn down, JPM should be defensive given strong earnings power, robust capital and solid/high loan loss reserves," he said.
Related: Veteran fund manager picks favorite stocks for 2024
