NEW YORK ( TheStreet) -- JPMorgan Chase's ( JPM - Get Report) third-quarter results and cautious outlook may have disappointed the markets on Thursday, but the stock remains "exceptionally attractive", according to Oppenheimer analyst Chris Kotowski.

"While there was a lot of noise in the report, as there always is, the bottom line is that ROTE Return on Tangible Equity was 13%, loans grew 1.0% and the share count shrank 2.8%," Kotowski wrote in a report Thursday. "Not bad given the environment."

The bank reported a 4% decline in net income to $4.26 billion or $1.02 per share on a managed basis compared to a year-ago net income of $4.42 billion or $1.02 per share. Revenues came in at $24.36 billion, a 11% decline from the second quarter revenue of $27.41 billion.

While both the topline and bottomline numbers topped the Street's view, investors were disappointed by the quality of the beat. The bank reported accounting gain of $1.9 billion, or 29 cents per share, from the decline in the value of its own debt, which helped offset a $542 million pre-tax loss from its private equity business and an additional $1 billion in pre-tax litigation expenses.

Still, the report showed that "'plain vanilla' banking is doing fine", but that with the blow-out in high yield and European credit spreads, trading was "very poor" and private equity worse, Kotowski wrote. "However, "very poor" trading means a quarter of light earnings rather than a balance sheet event, and the Basel III ratio went up, not down," he argued.

JPMorgan sounded a cautious view in its guidance for the fourth quarter during its analyst conference call, spooking markets.

The management said that market conditions in the fourth quarter might be similar to that experienced in the third quarter, providing a bleak outlook for investment banking. It also scaled back branch expansion plans and released less reserves on expectations that the pace of asset quality improvement will slow.

But here too, Kotowski takes a more optimistic view.

He argues that so long as credit spreads do not widen sharply as they did in August, it seems reasonable to expect a recovery in trading. He also takes a rather contrarian view that investment banks will ultimately benefit from the stress in Europe. "However much it hurts the U.S. banks, and forces some retrenchment, itis hard to see how it would not have a greater impact on European banks, which is after all, where most of these companies' competition is housed."

The analyst also thinks that more buybacks may be in store from JPMorgan, although CEO Jamie Dimon said the bank was uncertain about how and when to use their excess capital. The Federal Reserve is yet to issue guidance on whether it expects banks to attain international capital standards ahead of schedule.

But Kotowski argues that the regulator is unlikely to require the bank to get to a capital level of 9.5% immediately. "From a regulator's point of view, for example, what is to be gained by forcing JPM to 9.5% by late 2012, when BAC can't possibly get close to that?" Kotowski wrote. "Also, it cannot be doubted that the funding markets care not only about stated equity as a percent of risk assets, but also about market cap to assets. Buybacks, as long as they don't degrade the capital ratios, can be agents of stability."

JPMorgan may spend less towards buybacks in the future but might end up reducing more sharecount given the lower share price.

Kotowski trimmed the fourth quarter 2011 estimates but retained his outperform rating on the stock with a 12-18 month price target of $48, a 45% upside from these levels.

--Written by Shanthi Bharatwaj in New York

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