NEW YORK (
annual investor day could provide spark some headlines Thursday as management will be expected to not only drill down on health of the firm's core business lines but also weigh in on some of the more murky issues confronting the banking industry these days.
While investors will be waiting to hear from Chairman and CEO Jamie Dimon, it is actually CFO Mike Cavanagh who is slated to kick off the festivities shortly after tomorrow's opening bell. Over the next seven hours, the company will perform a dog and pony show in which its executive management team including Investment Bank CEO Jes Staley, Retail Financial Services CEO Charlie Scharf, Mary Erdoes, the head of JPMorgan's asset management business, and others are expected to make presentations touting the contributions of their respective businesses to the bottom line.
Since JPMorgan and the other banks reported
last month, the investor day is really more of a chance for institutional investors to get business-specific "nuts and bolts" from Dimon and Co., as one analyst describes the extensive presentations.
On Jan. 15, JPMorgan reported net income of $3.3 billion, or 74 cents a share, for the fourth quarter, besting analysts expectations and its year-ago results, although continued weakness in credit quality was a disappointment for Wall Street. The stock is down nearly 11% since its close at $44.69 on Jan. 14, the session before the report.
Shares fell most precipitously (nearly 7%) on Jan. 21, after President Obama embraced the so-called 'Volcker Rule', which calls for a ban on proprietary trading and other risky tactics at banks. Based on Tuesday's close at $39.88, the stock was off 4.3% year-to-date, and down roughly 17% from a 52-week-high of $47.47 reached in October. Shares were up almost 2% to $40.67 in recent trades.
Given the sharp downward trend in the shares over the past month, the company can expect to be grilled on strategy.
"I am more interested on finding out what their outward plans are -- so many banks are inwardly focused right now -- I'd like to start hearing, if possible, what their plans are for growth," Bell Rock Capital chief investment officer Cassandra Tororian writes in an email.
"Some of that they have spoken of recently ... but I'd like to hear more both on plans with retail as well as plans with the investment bank and what the pipeline looks like in that regard. Anything related to visibility on commercial real estate would be helpful too," she adds.
Specifically, investors will want the company to address the potential negative effects on its investment banking and corporate/private equity businesses if the proposed Volcker rule gets passed, as well as how the new credit card rules - implemented earlier this week -- are expected to affect the company's already troubled card business. JPMorgan has provided some color on the card business in the past, including saying it expects to take a net income hit of between $500 million and $750 million in 2010 from the credit card rule changes.
And in a Form 10-K filed with the
Securities and Exchange Commission
earlier Wednesday, it said it expects its Card Services unit to post losses of $1 billion for each of the first two quarters of fiscal 2010. The firm also extensively discusses the fact that regulatory changes would impact various businesses in the 10-K, but the language is mostly of a boilerplate variety.
The company's outlook for the macro economy will also be a hot topic, as its continued stabilization is key to the health of the bank's bulk of consumer mortgages and commercial loans. There will also be interest in the view of JPMorgan executives about how the banking industry itself is changing in the wake of the financial crisis.
"My sort-of overarching question
to the company is how do you see banking in the future?" says Nancy Bush, an independent analyst who covers large and regional banking institutions including JPMorgan. "Everyone is looking for the new normal, what do you think the new normal is?"
JPMorgan is "the most successful large bank left standing at the end of the day," she adds. "Dimon should be the one who should be able to take advantage of that, but we don't know how he will be hamstrung by what's coming down the pike. If the Volcker rule plays out, what happens to JPMorgan as a universal bank?"
It will be interesting to see if the meetings provide any real revelations. Dimon has never been one to beat around the bush, but he also is typically cautious in his remarks to the public regarding future performance. That has become especially apparent over the last two years.
Sanford Bernstein analyst John McDonald says the stock is attractively valued compared to its peers. He notes JPMorgan currently has the second lowest P/E ratio of the big banks (based on fiscal 2011 estimates), coming in at 8.6 times, compared to
Bank of America
at 8.1 times. On a price-to-tangible book value basis, JPMorgan's ratio is 1.5 times, slightly below the average of 1.6 times, according to McDonald's note.
JPMorgan is "well positioned for earnings leverage in the
second half of 2010 and beyond but loan modifications, foreclosure expenses and repurchase reserves could delay the story," McDonald writes.
McDonald views JPMorgan as "an early-cycle credit play which should provide earnings leverage towards the back-half of the year as provision expense continues to come down," and estimates the company could have excess reserves equal to $2 per share in earnings. "The timing and magnitude of earnings leverage is, however, inextricably tied to the impact of reserves for modified loans and continued allocations for impaired WaMu loans," he says.
Don't forget to keep an ear open for any possible further succession hints. Dimon came as close as he likely is going to get for now to announcing a possible successor when he made changes in the investment bank last year, promoting Jes Staley to CEO, while former co-head Bill Winters resigned. The investment bank's other co-head,
, is now Vice Chairman at the firm.
--Written by Laurie Kulikowski in New York.