NEW YORK ( TheStreet) -- Saying he expects the company "to continue to take market share and buy back stock with excess cash flow," FBR Capital Markets analyst Paul Miller on Friday reiterated his "Outperform" or "Buy" rating for JPMorgan Chase ( JPM). Following a disappointing start to bank earnings season, with JPMorgan Chase reporting an 11% quarter-over-quarter revenue decline, Miller lowered his 2012 earnings estimate for the company to $5.00 a share from $5.65, but kept his price target for JPMorgan's shares at $46.00, implying 46% upside for the shares.
JPMorgan Chase CEO Jamie Dimon
Miller lowered his "normalized earnings estimate" for JPMorgan to $6.86 from $7.23 a share per year, "due to a sluggish capital markets outlook," and estimated that for the fourth quarter, JPM would post EPS of "$1.07 on an operating basis and $0.91 on a GAAP basis in 4Q11, after taking into account litigation expenses." After $4.4 billion in share buybacks during the fourth quarter -- with JPMorgan CEO James Dimon apologizing during the company's conference call over poor market timing -- Miller said the company was "well positioned with a 7.7% Tier 1 common ratio per Basel III requirements." Over the previous several quarters, the release of loan loss reserves was a common theme for the largest U.S. banks, propping up earnings, or in the case of Bank of America ( BAC) in the second quarter, mitigating losses. During the second quarter, JPMorgan's loan loss reserves declined by $1.2 billion, while Bank of America released $2.5 billion in reserves, Citigroup ( C) released $2.2 billion in reserves and Wells Fargo ( WFC) released $1.1 billion. Despite a continued improvement in credit quality, JPMorgan took a much more conservative approach on credit during the fourth quarter, releasing just $150 million in loan loss reserves. Miller said the company was "on the conservative side," with reserves covering "2.4x NPAs or 4.16% of loans," and that the company "should release reserves over the next several quarters." While Miller said that JPM's worst-case estimate of $3 billion in losses "if the peripheral European nations do end up defaulting," seemed "trivial in the grand scheme of business done in Europe," the analyst said his firm hesitated "to assume $3 billion is the amount the company would lose given the contagion risk from other European banks and other financial intermediaries."