This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

What JPMorgan Shareholders Really Care About

Stocks in this article: JPM

NEW YORK (TheStreet) -- When JPMorgan Chase (JPM) reports fourth-quarter earnings Tuesday, the immediate headlines would likely focus on whether or not the bank beat estimates, whether its legal costs, which wiped out profits in the third quarter, continued to climb and what the bank's outlook is for 2014 amid a more complex regulatory climate.

But the most relevant question for long-term shareholders is whether the bank can continue to deliver a high return on capital. That's what makes the large legal tab and the volatile earnings stream from trading operations bearable for shareholders.

A higher capital burden and regulatory compliance costs has made it more difficult for banks to deliver returns in the high teens. Five years past the crisis, this question remains largely unanswered and, unfortunately, the fourth-quarter results are unlikely to reveal anything new.

Shareholders might have to wait for the bank's investor day in February, when it sets forth its strategy and targets for the year.

Analysts expect JPMorgan to report fourth-quarter earnings per share of $1.35 on revenues of $23.685 billion, according to estimates from Thomson Reuters.

The fourth quarter is expected to be relatively clean, with the bank having already made a large reserve build in the previous quarter.

JPMorgan reported an unexpected loss in the third quarter, the first loss since Jamie Dimon took over as CEO in 2006, after it took a $7.2 billion post-tax legal charge to meet escalating demands and penalties from multiple government agencies.

In the fourth quarter, the bank announced a number of legal settlements, including a $13 billion settlement with the Department of Justice over mortgage-backed securities sold by the bank and its Bear Stearns and Washington Mutual units before the crisis. The bank also paid $4.5 billion to settle suits from private label investors.

It also recently announced a $1.7 billion settlement over claims that it failed to alert authorities about suspicious activity Bernard Madoff, even though it cut back on its own exposure to the $65 billion Ponzi scheme. The bank said it would take a $850 million charge in relation to the Madoff settlement in its fourth quarter.

Other aspects of the business are expected to be more of the same. Sluggish loan growth, weak fixed income trading revenue offset by stronger investment banking fees, a sharp drop off in mortgage banking income (this has been priced in) and continued reserve releases on the back of improving credit quality.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • 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 Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,660.80 +303.93 1.75%
S&P 500 2,045.65 +32.76 1.63%
NASDAQ 4,722.1450 +77.8330 1.68%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs