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NEW YORK (
JPMorgan Chase(JPM - Get Report) remains the most popular big bank stock among Wall Street analysts as it
prepares to release third quarter earnings results Friday .
Twenty six of 39 analysts recommend JPMorgan shares to investors, while 12 are neutral and just one, Charles Peabody of Portales Partners, has an "underperform," recommendation, which he has maintained for almost exactly a year.
All that adds up to a rating of 4.4 out of 5 for JPMorgan, according to
Bloomberg's scoring system. That is the best among JPMorgan's major U.S. peers, including
Bank of America(BAC - Get Report),
Citigroup(C - Get Report),
Morgan Stanley(MS - Get Report) and
Goldman Sachs(GS - Get Report). Citigroup is close behind with a 4.34 rating, while Goldman comes in last of those six with a score of 3.32.
Investors also are bullish on JPMorgan, with shares up 2.19% to $51.86 in mid-morning trading Thursday. The bank's stock remains
among the cheapest in the financial sector on a forward price-to-earnings basis. The shares closed at $50.75 Wednesday and traded for just 8.5 times the consensus 2014 earnings estimate of $6.00, among analysts polled by
A call and an email message to Peabody, the lone bear on JPMorgan, weren't returned, and his research could not be obtained, but he told
Bloomberg in August he expected an eventual $22 billion in litigation costs for the bank over the next several years, and he thought those costs could reach $5 billion this year.
Since then, JPMorgan has shelled out a total of $1.3 billion to regulators over the "London Whale" trading debacle and an investigation of "illegal credit card practices." The bank also have to pay as much as $11 billion to resolve issues over mortgage backed securities it sold leading up to the crisis.
"The regulators and the [Obama] Administration want to remove benefits of being big," Peabody said in the August interview. "You're seeing that in the way they're imposing capital restraints, the liquidity requirements, and now if you are too big too manage, they're going to raise the costs of litigation for being too big to manage," he said at the time. He also has "underperform" recommendations on Bank of America, Citigroup and Morgan Stanley, while he rates Goldman "sector perform."
Keefe Bruyette & Woods acknowledged the legal issues in an Oct. 2 report that cited JPMorgan as a top pick, along with Citigroup and Bank of America. Low valuation to earnings estimates is the main reason KBW likes these stocks.