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Discover: Bank Stock Winner

JPMorgan acquired Bear Stearns in March 2008, as the investment firm faced a liquidity crisis that was likely to lead to bankruptcy. JPMorgan bought the failed Washington Mutual from the Federal Deposit Insurance Corp., after the nation's largest savings and loan institution was shut down by regulators in September 2008.

The FHFA settlements are part of an expected $13-billion package of settlements between JPMorgan and the Department of Justice, regulators and state attorneys general. JPMorgan didn't admit any fault in its FHFA settlement, meaning the bank avoided a potential landmine, since other institutional investors suing the company would have made good use of such an admission.

But the Justice Department is expected to insist on some admission of wrongdoing by JPM, and the phrasing of such language is delaying the overall settlement, according to media reports.

JPMorgan's shares were down 0.2% on Monday to close at $52.68.

The KBW Bank Index (I:BKX) rose 0.2% to 64.98.

Discover

Shares of Discover Financial Services have returned 35% this year. The stock trades for 10.2 times the consensus 2014 earnings estimate of $5.07 a share, among analysts polled by Thomson Reuters. That is a low forward P/E multiple, considering the company's return on equity and the 4% year-over-year growth of its credit card loan portfolio. The consensus 2015 EPS estimate is $5.32.

The card lender on Oct. 21 reported third-quarter earnings of $593 million, or $1.20 a share, declining from $637 million, or $1.24 a share, during the third quarter of 2012. A major factor in the year-over-year decline in earnings was that the company added $42 million in loan loss reserves during the most recent quarter, compared to a reserve release of $167 million during 2012.

Discover reported a strong return on equity of 23% for the third quarter

Oppenheimer analyst Ben Chittenden rates Discover "outperform," with a 12-18 month price target of $58, and in a note to clients following the earnings release called the company his "our top pick in the credit card space."

DFS Chart DFS data by YCharts

Interested in more on Discover Financial Services? See TheStreet Ratings' report card for this stock.

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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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