This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

JPMorgan's Stock Is Cheap Even With Regulatory Pain in 2014: KBW

Stocks in this article: JPM BAC C WFC

NEW YORK ( TheStreet) -- Shares of JPMorgan Chase (JPM) trade at a relatively low premium to consensus earnings estimates, and the multiple remains cheap even when factoring significant hits to 2014 earnings from new capital requirements and the Volcker Rule, according to KBW analyst Christopher Mutascio.

JPMorgan's shares closed at $55.49 Tuesday and traded for 9.10 times the consensus 2014 earnings estimate of $6.10, among analysts polled by Thomson Reuters. In comparison, Bank of America (BAC) traded for 10.7 times the consensus 2014 EPS estimate of $1.37, based on Tuesday's closing price of $14.64. Wells Fargo (WFC) closed at $44.03 Tuesday, trading for 11 times the consensus 2014 EPS estimate of $4.02, while Citigroup (C) closed at $51.48 and traded for 9.2 times the consensus 2014 EPS estimate of $5.57.

So among the "big four" U.S. banks, only Citi trades at a lower valuation than JPMorgan Chase. And Citigroup is a long way from achieving returns on equity as high as JPMorgan. Among the big four, only Wells Fargo has consistently outperformed JPMorgan Chase.

Taking consensus estimates out to 2015, JPMorgan is the second-cheapest among all U.S. bank stocks for which consensus estimates for that year are available.

So what are investors afraid of? After all, JPMorgan earned a record $21.3 billion in 2012, or $5.20 a share, despite booking at least $6.4 billion in losses from the "London Whale" hedge trading problems. The company reported second-quarter earnings of $6.5 billion, or $1.60 a share.

Investors are concerned with federal regulators' recent proposal for higher minimum supplementary Basel III Tier 1 leverage capital ratios for the nation's highest banks. Under Basel III, the largest banks need to calculate a "supplementary" Tier 1 leverage ratio, which incorporates off-balance-sheet items. Under the Basel agreement, the minimum supplementary Tier 1 leverage ratio is 3%, but for the largest U.S. banks the new proposal requires a minimum of 5%, with affected holding companies required to maintain supplementary Tier 1 leverage ratios of 6%, by January 2018.

In addition to JPMorgan's multiple regulatory investigations, investors are concerned that the Federal Reserve's pending finalization of the Volcker Rule's ban on proprietary trading could cause trading revenue to sink considerably during 2014.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs