JPMorgan Still Chasing Deals?

JPMorgan ChaseJPM seized on opportunity this weekend by agreeing to buy distressed Bear StearnsBSC, but that doesn't mean the banking titan is done shopping -- particularly in the consumer business.

Market participants and analysts have been wondering for some time when the New York-based bank would be ready to make some deals, particularly in the hard-hit regional bank sector. One of JPMorgan Chase's last significant deals in the retail banking space was its merger with Bank One in July 2004. That deal resulted in the installation of CEO Jamie Dimon, the former head of Bank One and a veteran of CitigroupC.

"Since they paid less for Bear than what they would for a regional bank, I think they have plenty of firepower left for more deals," Cassandra Toroian, the president and chief investment officer of Bell Rock Capital, writes in an email.

With the Federal Reserve's blessing, JPMorgan Chase agreed on Sunday to pay just $2 a share, or $236 million, for Bear Stearns. The deal is expected to close by the end of June.

On Monday, Fitch Ratings affirmed ratings on JPMorgan Chase, reflecting the agency's belief that "the transaction as structured does not significantly increase [JPMorgan Chase's] risk profile nor materially dilute its capital structure or liquidity position."

JPMorgan Chase has largely sat on the sidelines over the past few years when it came to bank deals, as it finished upgrading its systems after merging with Bank One. In April 2006, JPMorgan traded its consumer trust business and $150 million for Bank of New York Mellon'sBK consumer, small-business and middle-market banking businesses. But over the past year, market speculators have linked the bank to possible deals for SunTrust BanksSTI and more recently to mortgage-troubled Washington MutualWM.

"We still believe JPMorgan has the capacity and integration team resources to take on a WaMu deal, which is a retail side of the house endeavor," writes David Hendler, an analyst at CreditSights, in a note dated late Sunday. "Timing may be delayed a quarter as tuck-in Bear deal absorbed."

"[T]he low price paid for Bear Stearns could leave JPMorgan with sufficient financial resources to make a bid for WaMu," Hendler writes.

Toroian, who is also a contributor to TheStreet.com's sister Web site RealMoney.com, named "plain-vanilla" banks like Sovereign BancorpSOV or a Midwest bank such as National CityNCC or KeycorpKEY -- both of which are struggling from the fallout of the mortgage industry -- are also good match-ups for JPMorgan Chase.

Nat City has been reportedly looking for a buyer, according to recent media reports.

To be sure, while executives including Dimon have acknowledged that a retail banking acquisition could be appealing, the company is also looking for opportunities in other areas of the business -- most notably in mortgage lending. Other businesses that the company would consider include commercial banking, credit cards and asset management.

Still, it's possible that the banking company may hold off altogether on other acquisitions until Bear Stearns' businesses -- namely its prime brokerage (an area that JPMorgan Chase has not developed), asset management and clearing, among other things -- are integrated. But most observers say the distraction would only be temporary.