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JPMorgan CFO Change Helps Put Whale In Rear View

The company reported on Nov. 8 that after submitting a revised capital plan to the Federal Reserve, the company was approved to buy back up to $3 billion in shares during the first quarter of 2013.

Hawken's "Buy" rating for JPMorgan Chase was unchanged, along with his price target of $46, which represents 13% upside to the closing price on Monday of $40.59.

After the Federal Reserve released the economic scenarios it would use for its next round of stress tests to be completed in March 2013, KBW analyst Frederick Cannon estimated that JPMorgan would increase the quarterly dividend by 10 cents to 40 cents, while buying back a total of $12.4 billion in common shares during 2013. This would be quite a significant capital return, especially in light of the company's efforts to improve its risk management this year.

JPMorgan's already have an attractive dividend yield of 2.96% based on the 30-cent dividend. If Canon's estimate proves to be accurate, the dividend yield would be 3.94%, based on Monday's closing price. That is quite a significant bit of income for yield-hungry investors in the prolonged low-rate environment.

Preventing another "London Whale."


Citigroup analyst Keith Horowitz on Tuesday, following a meeting with the company's new Co-Chief Operating Officer and Operating Committee member Matthew Zames, said that "one clear takeaway from the meeting is investors remain concerned about risk [management] and lack the ability to 'trust' [that] JPM is not harboring other unseen risks."

According to Horowitz, "Zames emphasized JPM's renewed commitment to 'empower' independent risk managers in the CIO, increase transparency, and hold the Corporate segment to more rigorous standards that have long been in place in the Investment Bank." Horowitz said that his firm believed that "the failure in the CIO was simply an oversight due to lack of focus," and that although it was "a painful and costly mistake, lessons have been learned, processes have been rectified, and the CIO operation will be very differently managed going forward."

"Despite the large size of JPM's balance sheet, we believe [management] has their arms around key risks, and ironically after this issue now have greater confidence in JPM relative to peers," Horowitz said.

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