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TheStreet Open House

JPMorgan Ready to Take Wall Street Top Spot (Update 1)

Stocks in this article: JPM GS MS BAC C

Updated to reflect earnings estimates and additional analyst comments

NEW YORK ( TheStreet) - JPMorgan Chase (JPM - Get Report) is on track to score a rare Wall Street "Hat Trick" as it tops the merger advisory, equity and debt underwriting rankings.

For the nation's largest bank, taking the lead in Wall Street's key investment banking activities is yet another sign that first quarter earnings can provide a continued lift to shares after Federal Reserve stress test results, dividend increases and a 2012 stock surge help investors forget a lackluster 2011.

With a bright outlook for M&A and JPMorgan's big role in highly anticipated underwriting mandates like Facebook's initial public offering, the data may signal a turning of the corner for its investment bank after the company's Chief Executive Jamie Dimon underplayed the unit's importance in a fourth quarter earnings call.

Preliminary first quarter data shows that JPMorgan led all banks in M&A advisory, equity underwriting and debt issuance volumes in the first quarter, making it the only Wall Street banking unit likely to earn over $1 billion in fee revenue, according to Dealogic. The data shows that after beating out competitors like Goldman Sachs (GS - Get Report) and Morgan Stanley (MS - Get Report) for the underwriting top spots, JPMorgan is expected to capture roughly 8% of overall investment banking revenues, with nearly 50% of its earnings coming from a booming debt underwriting business.

After urging investors to focus on the bank's Main Street businesses in fourth quarter earnings, Jamie Dimon may sound like more of a Wall Street bull this quarter, even as overall investment banking activity continues to track lower. In a fourth quarter earnings call, Dimon urged the media to "forget trading" and instead focus on the bank's mortgage and business loan growth. "There's no part of the investment bank that is naturally stable," said Dimon in January. "It's not a mystical thing - it will come back. I don't think that the lower numbers are permanent. When things come back it will boom again. And it won't be because we're geniuses. It will be because we stayed in the game."

If Wall Street is set to boom again, staying in the game won't just benefit JPMorgan, as an investment banking performance gap widens. In 2012, analysts have been gradually boosting the earnings estimates for Goldman Sachs, Morgan Stanley, Citigroup (C - Get Report) and Bank of America (BAC - Get Report) who all have large capital markets businesses. Those upgrades, in addition to stronger than expected March dividend and buyback announcements after the Fed's stress tests added fuel to a 2012 bank sector rally.

JPMorgan shares are up over 35% in 2012 to $45.99, while peers like Goldman Sachs, Morgan Stanley and Citigroup post similar sized gains. The top financial performer on the Down Jones Industrial Average, Bank of America's near 80% gain has nearly quadrupled the KBW Bank Index's (KBW) 20% gain and put shares near $10.

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Morgan Stanley bank analyst Betsy Graseck noted that a quarter-over-quarter surge in investment banking activity has been a key to earnings upgrades for many large banks, even as Wall Street activity tracks below 2010 levels. On March 18, Graseck cited stronger investment banking fee and complimentary trading revenues as the primary drive of a boost to JPMorgan's first quarter earnings per share estimates to $1.22.

Still, don't expect Dimon to come out saying "forget Main Street." Graseck notes that JPMorgan is likely to see continued loan growth as it steals mortgage origination market share from Bank of America.

JPMorgan is expected to earn $1.11 per share when it reports first quarter earnings on April 13, according to consensus estimates compiled by Zacks. Overall, analysts expect JPMorgan to earn a profit of $4.3 billion on revenue of $24.3 billion in the quarter, according to Bloomberg data, reflecting a fall in 2012 profits compared with the prior year.

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