In the meantime, with the daily leaks of wildly diverging settlement figures, Kotowski is now factoring a $5 billion global legal settlement into his EPS estimate for JPMorgan. "We obviously have no idea what it will be, but in putting a $5B assumption into our estimate, we want to point out that even this amount would leave JPM with earnings comfortably above its dividend."
JPMorgan pays a quarterly dividend of 38 cents a share, for a yield of 2.94%, based on Wednesday's closing price of $51.70.
But based on Kotowski's figures, an $11 billion third-quarter settlement would completely wipe out JPMorgan's third-quarter results.
A quarterly loss would not threaten the dividend, as it wouldn't be an operating loss, and the dividend is still relatively modest compared to JPMorgan's underlying operating earnings power.Kotowski rates JPMorgan "outperform," with a $71 price target, and estimates the bank will earn $5.30 a share this year, with EPS growing to $6.44 in 2014. Deutsche Bank analyst Matt O'Connor expects a much smaller hit to earnings for JPMorgan this quarter, estimating the company "may have existing legal reserves of $4-6b (of the $18b they've taken since 1Q10." "Adding in another $2b
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