Shares of JPMorgan Chase have gained 6.5% in 2013, in line with the KBW Bank Index. Over the past year, the stock has gained a modest 1.9%.
JPM Total Return Price
JPMorgan has not been able to firmly put behind the issue of the massive $6- billion trading losses at its Chief Investment Office caused by what the bank says was a botched hedging strategy.
While the bank finished 2012 with record profits, it continues to be under the scrutiny of regulators and politicians, who see the lapse in risk management at the nation's biggest bank as further evidence that big banks are too big to manage and should be broken up.
JPMorgan also took a knock at the Federal Reserve's stress test. While the regulator approved the bank's plan to buy back up to $6 billion in shares and raise its dividend by 8 cents to 38 cents per share starting in the second quarter, the approval was only "conditional". The Fed said it had identified weaknesses in the bank's capital planning and instructed the bank to resubmit its plan.
Still, analysts remain bullish on the bank in the first quarter. "Don't underestimate a management team with its proverbial back against the wall. Do you remember what JPM posted in 3Q12 after the London Whale debacle negatively impacted 2Q12 results?" KBW analyst Christopher Mutascio reminded investors in a report, noting that third quarter results were well ahead of their expectations.
Analysts polled by Thomson Reuters expect JPMorgan to report earnings per share of $1.38, up from $1.19 in the year-ago quarter. Revenues are expected to drop slightly to $26 billion on weaker trading revenues.
"The stock has underperformed over the past month (+1% vs. +5% for the BKX) on political and regulatory concerns (mostly related to last year's 2Q trading loss). However, with likely another strong 1Q, we believe focus will shift back to the strong underlying earnings power of the company," Deutsche Bank analyst Matthew O'Connor said in a report.
The analyst believes earning momentum will be boosted by continued market share gains and cost management that would generate $4 billion in savings.
The stock currently trades at 1.23 times its tangible book value and less than 9 times its 2013 forecasted earnings per share.