This Day On The Street
Continue to site
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

Analysts Give JPMorgan a Pass on Unknown Legal Expenses

NEW YORK ( TheStreet) -- Analysts remain stubbornly bullish on JPMorgan Chase (JPM - Get Report) despite the bank's mounting legal bills.

CFO Marianne Lake on Monday said during an investor presentation that the bank's legal expenses in the third quarter could top $1.5 billion following a "crescendo of activity" in the past few weeks, erasing the benefit from loan loss reserves.

The bank's mortgage origination business could see a loss in the third and fourth quarter. And markets revenue in the third quarter could be flat to down 5% from a strong third quarter of 2012.

Analysts on Tuesday took down their earnings estimates for the bank following the fresh guidance, but many reiterated their "buy" ratings citing attractive valuations.

KBW analyst Chris Mutascio lowered his third quarter earnings estimate to $1.12 a share from $1.45, to factor in the higher legal expenses of $1.67 billion. KBW's full year 2013 estimate was lowered to $5.70 from $6.11. "We think it is prudent to carry forward some legal reserve builds despite the projected sizable build up we expect in 3Q13. Until the recent litigation actions are settled or we get more information from management, we think it is prudent to increase litigation costs over the next several quarters," Mutascio wrote in a report.

Still, he maintains an "outperform" rating on the stock. "In an environment where investors are willing to potentially wait years for short-term interest rates to rise and net interest margin to expand while bidding up 'asset-sensitive' bank stocks in anticipation, we are willing to buy the shares of JPM at a significantly discounted valuation knowing legal costs will eventually fall. Despite our earnings revisions, JPM shares still trade at just 8.9x our 2014 EPS estimate of $5.95. Our $63 target price represents just 10.6x our 2014 EPS estimate (we have yet to publish 2015 EPS estimates) and 19% potential upside potential -- not including a dividend yield of nearly 3.0%," he wrote.

Atlantic Equities analyst Richard Staite also lowered estimates on a "noisy" quarter but retained his positive outlook. "We think the shares are attractively valued on a 2014 PE of 8.6x with the main catalyst to a re-rating being a reduction in the litigation overhang," he wrote in a note to clients.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
JPM $56.20 -0.60%
AAPL $94.99 -0.02%
FB $99.54 -0.21%
GOOG $678.11 -0.68%
TSLA $148.25 0.18%


Chart of I:DJI
DOW 16,014.38 -12.67 -0.08%
S&P 500 1,852.21 -1.23 -0.07%
NASDAQ 4,268.7630 -14.99 -0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs