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Bank Stocks Soar as Debt Deal Prospects Brighten: Financial Winners (Update 1)

For more on what to expect from Wells Fargo, please see TheStreet's Wells Fargo Record Earnings Loom, but Growth Stays Tied to Economy.

Analysts on average expect JPMorgan Chase to report third-quarter net income of $4.781 billion, or $1.19 per share. In comparison, the bank earned $1.60 a share during the second quarter and $1.40 a share during the third quarter of 2012. JPMorgan's revenue is expected to decline to $24.942 billion during the third quarter from $25.958 billion the previous quarter and $25.863 billion a year earlier. JPMorgan CFO Marianne Lake at a conference on Sept. 9 said a "crescendo" of regulatory actions against the firm would lead to provisions for legal expenses "which will more than offset" an expected "$1.5 billion or so of consumer [loan loss] reserve releases."

Lake also said that JPMorgan was expecting its residential mortgage loan production unit to show net losses for the second half of 2013.

The major overhang on JPMorgan is an expected large settlement of multiple criminal and civil investigations of the company's mortgage lending, sales and servicing activities, which could climb as high as $11 billion, according to media reports.

Despite the regulatory onslaught against JPMorgan, which during the third quarter included an agreement to pay $410 million "in penalties and disgorgement to ratepayers," to settle Federal Energy Trading Commission charges of market manipulation, $920 million in fine s to settle multiple probes of the 2012 "London Whale" trading fiasco and another $369 in fines and customer refunds to settle regulatory charges of "illegal credit card practices," the bank remains analysts' favorite large-cap bank stock.

Out of 39 analysts covering JPM, 26 rate the shares a "buy," in part reflecting the stock's low valuation to forward earnings estimates. The shares rose 3% Thursday to close at $52.26 and traded for just 8.7 times the consensus 2014 EPS estimate of $6.00.

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-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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