JPMorgan Still Chasing Deals?
JPMorgan Chase
(JPM) - Get Report
seized on opportunity this weekend by agreeing to buy distressed
Bear Stearns
(BSC)
, but that doesn't mean the banking titan is done shopping -- particularly in the consumer business.
Market participants and analysts have been wondering for some time when the New York-based bank would be ready to make some deals, particularly in the hard-hit regional bank sector. One of JPMorgan Chase's last significant deals in the retail banking space was its merger with Bank One in July 2004. That deal resulted in the installation of CEO Jamie Dimon, the former head of Bank One and a veteran of
Citigroup
(C) - Get Report
.
"Since they paid less for Bear than what they would for a regional bank, I think they have plenty of firepower left for more deals," Cassandra Toroian, the president and chief investment officer of Bell Rock Capital, writes in an email.
With the
Federal Reserve's
blessing, JPMorgan Chase agreed on Sunday to
pay just $2 a share, or $236 million, for Bear Stearns
. The deal is expected to close by the end of June.
On Monday, Fitch Ratings affirmed ratings on JPMorgan Chase, reflecting the agency's belief that "the transaction as structured does not significantly increase
JPMorgan Chase's risk profile nor materially dilute its capital structure or liquidity position."
JPMorgan Chase has largely sat on the sidelines over the past few years when it came to bank deals, as it finished upgrading its systems after merging with Bank One. In April 2006, JPMorgan traded its consumer trust business and $150 million for
Bank of New York Mellon's
(BK) - Get Report
consumer, small-business and middle-market banking businesses. But over the past year, market speculators have linked the bank to possible deals for
SunTrust Banks
(STI) - Get Report
and
to mortgage-troubled
Washington Mutual
(WM) - Get Report
.
"We still believe JPMorgan has the capacity and integration team resources to take on a WaMu deal, which is a retail side of the house endeavor," writes David Hendler, an analyst at CreditSights, in a note dated late Sunday. "Timing may be delayed a quarter as tuck-in Bear deal absorbed."
"
The low price paid for Bear Stearns could leave JPMorgan with sufficient financial resources to make a bid for WaMu," Hendler writes.
Toroian, who is also a contributor to
TheStreet.com's
sister Web site
RealMoney.com
, named "plain-vanilla" banks like
Sovereign Bancorp
(SOV)
or a Midwest bank such as
National City
(NCC)
or
Keycorp
(KEY) - Get Report
-- both of which are struggling from the fallout of the mortgage industry -- are also good match-ups for JPMorgan Chase.
Nat City has been reportedly looking for a buyer, according to recent media reports.
To be sure, while executives including Dimon have acknowledged that a retail banking acquisition could be appealing, the company is also looking for opportunities in other areas of the business -- most notably in
. Other businesses that the company would consider include commercial banking, credit cards and asset management.
Still, it's possible that the banking company may hold off altogether on other acquisitions until Bear Stearns' businesses -- namely its prime brokerage (an area that JPMorgan Chase has not developed), asset management and clearing, among other things -- are integrated. But most observers say the distraction would only be temporary.
"Given JPMorgan's strong financial position, I don't think that the Bear Stearns deal would impair them from pursuing an opportunity in regional banks that make sense both financially and strategically," says David Honold, a financial services analyst at Turner Investment Partners, a Berwyn, Pa.-based investment manager. "If the right deal comes along at the right price, JPMorgan can handle it." Turner Investment does not own shares of JPMorgan Chase.
Honold adds that JPMorgan Chase, while lacking a presence in certain areas of the country, most notably the southeast, does not have to do a deal.
"All of the uncertainty and dislocation out there creates tremendous opportunity for JPMorgan Chase to grow organically," Honold adds. "They may find that they're taking customers in some markets to such a degree that it would preclude from even making an acquisition."
A JPMorgan Chase spokesman declined to comment regarding future acquisitions on Monday.
Shares of JPMorgan jumped more than 10% to $40.31 on Monday.








