JPMorgan Chase: Financial Winner

NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) was the winner among large U.S. banks on Tuesday, with shares rising 2% to close at $49.14.

The broad stock indices all ended higher, and the KBW Bank Index ( I:BKX) was up 1% to close at 58.28, with all 24 index components ending the session with gains.

The Federal Reserve Tuesday afternoon announced that U.S. consumer credit expanded at a seasonally adjusted annual rate of 3.4% during March, slowing from growth rates of 8.0% in February and 5.5% in January. The consumer credit growth rate for the first quarter was 5.7%, declining from 6.5% in the fourth quarter, but increasing from 5.4% in the first quarter of 2012.

JPMorgan Chase

Shares of JPMorgan Chase have returned 13% this year, following a 36% return during 2012. The shares trade for 8.3 times the consensus 2014 EPS estimate of $5.94, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is $5.67.

The forward price-to-earnings ratio is quite low for a bank stock in the current environment. JPMorgan on Monday was include among TheStreet's 10 Cheapest Bank Stocks to Forward Earnings.

Despite a strong earnings track record over the past several years, including record last year, despite losses of at least $6.2 billion from the "London Whale" hedge trading activities of its Chief Investment Office (CIO), JPMorgan's shareholders will vote at the company's annual meeting on May 21 to decide whether or not to separate James Dimon's combined roles as CEO and chairman of the bank's board of directors.

ISS Proxy Advisory Services last Wednesday said it was "supporting the shareholder proposal requesting an independent chair given the governance failure in connection with the CIO incident, the size and complexity of JPM's business, and the continued challenges faced by the company."

Then on Tuesday, rival proxy advisory firm Glass, Lewis & Co. also said it was in favor of a vote to split Dimon's two roles, while also advising shareholders to vote against three members of JPMorgan Chase's audit committee.

It has been widely reported that bank regulators, including the Office of the Comptroller of the Currency and the Federal Reserve, have expressed distrust in JPMorgan's Management Team. Following the completion of annual bank stress tests in March, the Fed required JPMorgan to submit a revised capital plan by the end of the third quarter.

Then again, the Fed did approve JPMorgan Chase's plan to raise its quarterly dividend on common shares during the second quarter to 38 cents a share from 30 cents, and also approved common share repurchases of up to $6 billion through the first quarter of 2014. That showed quite a bit of confidence in the company's capital strength, as well as its earnings power.

Based on the 38-cent quarterly payout, JPMorgan's shares have a dividend yield of 3.09%.

If shareholders vote to strip Dimon of his title as chairman of JPMorgan's board of directors, there is no way of knowing how the CEO will react, however Rafferty Capital analyst Richard Bove on Monday argued that shareholders should think twice.

In a note to clients, Bove wrote that "Jamie Dimon joined the executive team of JPMorgan Chase in 2005. In that year, JPMorgan earned $8.5 billion. In 2012, the company earned $21.7 billion. The pretax, pre-provision for loan losses results per share went from $4.41 to $8.62 or a gain of 95.5%." Bove added that "from the end of 2005 to last Friday, the stock price has risen by 19.9%. In this same period the Keefe Bruyette banking Index has fallen by 39.5%. JPMorgan has outperformed its peers by approximately 60% over this timeframe."

Interested in more on JPMorgan Chase? See TheStreet Ratings' report card for this stock.

JPM Chart JPM data by YCharts


-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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