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Updated with increased earnings estimates from UBS analyst Brennan Hawken, and with stock information for JPMorgan.
NEW YORK (
JPMorgan Chase (JPM - Get Report) announced late Monday that it would redeem $9 billion in trust preferred securities on July 12.
Because the new regulatory capital rules announced by the
Federal Reserve exclude most trust preferred equity from Tier 1 capital, the regulatory changes qualify as a "Capital Treatment Event," allowing JPMorgan Chase to redeem the relatively high-yielding securities at par value, rather than at their premium market values. The following trust preferred issues will be redeemed:
JPMorgan Chase Capital XV, Series O, with a coupon of 5.875%, for $92.9 million.
JPMorgan Chase Capital XVII, Series Q, with a coupon of 5.850%, for $500 million.
JPMorgan Chase Capital XVIII, Series R, with a coupon of 6.950%, for $750 million.
JPMorgan Chase Capital XX, Series T, with a coupon of 6.550%, for $909.6 million.
JPMorgan Chase Capital XXII, Series V, with a coupon of 6.450%, for $913.8 million.
JPMorgan Chase Capital XXV, Series Y, with a coupon of 6.800%, for $1.5 billion.
JPMorgan Chase Capital XXVI; Series Z, fixed-to-floating-rate, for $1.8 billion.
JPMorgan Chase Capital XXVII, Series AA, with a coupon of 7.000%, for $1 billion.
JPMorgan Chase Capital XXVIII, Series BB, fixed-to-floating-rate, for $1.5 billion.
UBS analyst Brennan Hawken on Tuesday raised his 2012 earnings estimate for JPMorgan Chase to $4.70 a share from $4.65, and his 2013 EPS estimate to $5.55 from $5.45, "driven by the redemption of the TruPS."
Hawken maintained his "Buy," rating for the shares, with a price target of $46, and said the target "assumes JPM will trade at 1.3x our 4Q12 [tangible book value] estimate in 12 months (vs. 10-year avg. of 1.9x)," adding that "we believe the
trading incident," announced on May 10, with hedge trading losses estimated at $2 billion, "will not permanently impair JPM's ability to generate mid-teens [returns on tangible equity], and believe its current valuation of 1.0x TBV will prove a highly attractive entry point."
JPMorgan's shares closed at $32.82 Monday, for a flat year-to-date return, following a 20% decline during 2011.
The shares trade for 0.9 times their reported March 31 tangible book value of $34.91, and for six times the consensus 2013 EPS estimate of $5.33, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $4.33.
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