This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Dimon's Political Victory Rings Hollow for Shareholders: FBR

NEW YORK ( TheStreet) -- FBR analyst Paul Miller said on Thursday that JPMorgan Chase (JPM - Get Report) CEO James Dimon's "political victory" on Wednesday was not enough to lift the company's shares out of their current trading range.

Dimon on Wednesday testified before the Senate Banking Committee, saying that JPMorgan would be " solidly profitable" for the second quarter, while not providing an updated figure for the company's hedge trading losses, previously estimated to be $2 billion.

The CEO said he was sorry that after being instructed to "reduce risk-weighted assets and associated risk" in its hedging portfolio -- in anticipation of new Basel capital requirements -- the firm's Chief Investment Office (CIO) "embarked on a complex strategy that entailed adding positions that it believed would offset the existing ones," leading to the losses, rather than simply reducing existing positions.

Miller said that "members of the Senate Banking Committee largely avoided tough or uncomfortable questions," and "on the rare occasion when a well-written question was asked, Dimon was good at deflecting a direct answer, and senators did not press for a full response nor did they have a relevant follow-up question."

Republicans on the Committee also used their questions to attack the Dodd-Frank banking reform legislation and the Volcker rule," which Miller said "maintains Republicans' ability to make changes to Dodd-Frank post the election."

Miller said that there were still "fundamental questions about the impact of the trading loss and visibility into the bank's true earnings power without a fully operational investment office," and that "Mr. Dimon failed to answer repeated questions relating to why the CIO moved to a different value-at-risk (VAR) model and its failure to disclose the move even when there was a significant change."

JPMorgan's shares closed at $34.30 Wednesday, returning 5% year-to-date, following a 20% decline during 2011. The shares have declined 16% since closing at $40.74 on May 10, just before Dimon disclosed the second-quarter trading losses.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

The shares trade just below 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.

Miller rates the shares "Market Perform," with a $37 price target, estimating JPMorgan Chase will report GAAP earnings $4.05 a share this year, followed by EPS of $5.18 in 2013. His operating EPS estimates are $5.00 for 2012 and $5.27 for 2013.

The analyst said "there is no doubt that JPMorgan remains a strong, well-capitalized bank," but that "the true earnings power of the company has become unclear." Prior to the CIO loss, "many investors were even expecting the bank to earn upwards of $7.00 in FY14," he said, adding "now, we wonder whether the company can still produce those earnings as we still do not know how much the CIO contributed to overall profitability over the last few years."

On a positive note, Miller said that "JPMorgan is the best positioned out of the big four" U.S. banks -- also including Bank of America (BAC - Get Report), Citigroup (C - Get Report), and Wells Fargo (WFC - Get Report) -- "to take advantage of dislocation in the market, but in the end, it may struggle to truly grow its balance sheet in a weak economic environment."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $15.58 -1.08%
C $51.38 -0.52%
JPM $61.93 -0.32%
WFC $52.14 -0.76%
AAPL $112.12 2.39%


Chart of I:DJI
DOW 17,084.49 +33.74 0.20%
S&P 500 2,013.43 +15.91 0.80%
NASDAQ 4,830.47 +19.6820 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs