The settlements announced Friday are unlikely to affect JPMorgan's fourth-quarter earnings. "[W]e think that the FHFA settlement is covered by established reserves," wrote Credit Suisse analyst Moshe Orenbuch in a client note on Monday. "Regarding the $1.1Bn settlement with Fannie Mae and Freddie Mac related to repurchase claims on whole loans originated from 2000-2008, we think that this may be covered, in part or its entirety, by JPM's existing mortgage repurchase reserves which stood at $2.2Bn as of 3Q'13," he added.
KBW analyst Christopher Mutascio expressed even more confidence JPMorgan would see no fourth-quarter earnings hit from the FHFA settlement. In a note to clients on Sunday, Mutascio wrote that the $4 billion FHFA settlement was "likely to fall under [JPM's] legal reserves," while the "The $1.15 billion rep and warranty settlement will be paid out of JPMorgan's repurchase reserve."
Both analysts remain upbeat on the prospects for JPMorgan's shares, with "outperform" ratings. Orenbuch's price target for the shares is $65, while Mutascio's price target is $63.00.
JPMorgan's shares closed at $52.77 Friday. The shares have returned 23% this year and trade for 8.8 times the consensus 2014 earnings estimate of $6.01 a share, among analysts polled by Thomson Reuters. That's one of the lowest forward price-to-earnings valuations for actively traded bank stocks. The consensus 2015 EPS estimate is $6.38.Based on a quarterly payout of 38 cents, the shares have a dividend yield of 2.88%. JPM data by YCharts
Interested in more on JPMorgan Chase? See TheStreet Ratings' report card for this stock.
Email. Follow @PhilipvanDoorn
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- 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 + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV