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JPMorgan Unmoved by Upgrade

NEW YORK ( TheStreet) -- JPMorgan Chase (JPM - Get Report) shares didn't seem phased on Friday after Citigroup upgraded the stock, calling the stock's recent underperformance an "excellent entry point."

Citigroup analyst Keith Horowitz raised his rating on JPMorgan shares to buy from hold, but the stock was trading slightly lower in recent action, down less than 1 percent to $40.18. That decline follows a plus 5% sell-off for the stock on Thursday after President Obama unveiled proposals to limit the size of banks and their ability to engage in certain investing activites, like hedge and private equity funds and proprietary trading.

Horowitz notes that the stock was off 3% overall in 2010 vs. a gain of 11% in the Keefe Bruyette & Woods bank index over the same period. His 12-month target for the shares is $48.

Quantifying the impact of Obama's proposed reforms on individual companies is difficult this early in the game, and that uncertainty is part of why the stocks of JPMorgan, Bank of America (BAC - Get Report), and Goldman Sachs (GS - Get Report) have been so roiled by the news.

Horowitz estimates that the removal of proprietary trading "would have a limited 2% impact on normalized EPS from assuming forced divestiture of private equity," for JPMorgan. "The other risk is the impact of 'size limits,' but we assign a very low probability that JPM will be forced to downsize its balance sheet given impact on credit availability," he writes.

From a fundamental standpoint, Horowitz is bullish on JPMorgan because the company has been proactive about containing credit losses and has a "superior" capital position.

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