Updated from 8:09 a.m. EDT with comments on industry mortgage results so far from Sterne Agee analyst Todd Hagerman, along with his price target and EPS estimate increases for JPMorgan and Wells Fargo.
NEW YORK (
) -- A chorus of analysts have raised their earnings estimates and price targets for
(JPM - Get Report)
(WFC - Get Report)
, in the wake of strong earnings reports on Friday from both companies.
earnings coverage for full details on
JPMorgan's second quarter
Wells Fargo's results
KBW analyst Christopher Mutascio on Sunday reiterated his "outperform" rating and raised his price target for JPMorgan's shares to $63 from $58, while raising his 2013 earnings estimate for the bank to $6.11 from $5.75 and his 2014 EPS estimate to $6.25 from $5.80. In a note to clients on Sunday, Mutascio wrote that his earnings estimate and price target increases were driven by "significantly lower net charge-off assumptions given better-than-expected credit metrics in 2Q13," as well as "better than originally anticipated trading and asset management income, and... a slightly lower-than-expected share count."
KBW's price target for JPMorgan represents "a reasonable P/E multiple of 10.0x to our 2014 EPS estimate," according to Mutascio.
Mutascio also said concerns over JPMorgan's narrowing net interest margin during the second quarter were "overblown." The margin contracted by 17 basis points during the second quarter to a low 2.20%. According to the analyst, "the vast majority of the compression was attributable to the nearly $110 billion increase in cash balances as the company chose to accelerate compliance with the proposed Basel 3 liquidity coverage rules. JPMorgan's net interest income declined to $10.7 billion during the second quarter from $10.9 billion in the first quarter. "The company's net interest income dollars did not decrease as nearly as much as the significant NIM compression would imply," Mutascio wrote.
Other analysts raising price targets for the bank included Keith Horowitz of Citigroup, who on Monday maintained his "buy" rating and raised his price target for JPMorgan Chase to $62 from $56, while sticking with his 2013 EPS estimate of $6.05 and his 2014 EPS estimate of $6.10.
"We leave 2013-2015 estimates unchanged as lower credit provisions [for credit losses] are offset by lower net interest income and mortgage banking and other fee income forecasts," Horowitz wrote in a note to clients on Monday. "Our estimates point to returns in the 13-15% range for the next 3 years, however, we raise our target to $62 driven by a slightly lower 12% cost of equity estimate. We continue to see good value in JPM shares," Horowitz wrote.