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JPMorgan Chase: Financial Winner

The KBW Bank Index (I:BKX) rose over 1% to close at $54.03, with all 24 index components rising for the session.

JPMorgan Chase


Shares of JPMorgan Chase have returned 13% this year, following a 36% return during 2012. The shares trade for 1.3 times tangible book value, and for 8.5 times the consensus 2014 earnings estimate of $5.81, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $5.47.

JPMorgan's stock trades at one of the lowest multiples to forward earnings among large U.S. banks.

Based on a quarterly payout of 30 cents, the shares have a dividend yield of 2.44%.

JPMorgan Chase earned $21.3 billion, or $5.20 a share, during 2012, despite $6.2 billion in hedge trading losses within the firm's Chief Investment Office. During the company's annual Investor Day meetings on Tuesday, JPMorgan said that its annual earnings target "through the cycle" was $24 billion, or $6.28 a share, based on the share count at the end of 2012. The company's "normalized" annual earnings target is $27.5 billion, $7.20 a share.

The company also estimated that its Basel III Tier 1 common equity ratio would rise to 9.5% by the end of this year, and that it would have $28 billion in excess capital over regulatory requirements by the end of 2014, excluding share buybacks.

Bank of America Merrill Lynch analyst Erica Penala rates JPMorgan a "buy," and in a report on Wednesday called JPMorgan "one of our top picks as in our view, the stock should re-rate," with "modest multiple expansion."

"The return of share buybacks in 1Q13 and the March 2013 Fed stress test should re-establish JPM as a capital return story, and give investors confidence that it is on its way to Basel 3 compliance," she wrote.
The Federal Reserve will announce the results of its annual stress tests on the nation's largest banks on March 7. Then, on March 14, the Fed will announce the results of the Comprehensive Analysis and Review (CCAR) of the banks' capital plans through the first quarter of 2014.

Penala estimates that JPMorgan will raise the quarterly dividend to 32 cents, and said that her earnings estimates assumed $5bn in dividends and $10bn in share buybacks during 2013.

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