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Balanced Risk-Reward for JPMorgan

Zacks Equity Research

On Feb 28, 2014, we issued an updated research report on JPMorgan Chase & Co. (JPM). The company reported better-than-expected fourth-quarter 2013 results.

On Jan 14, JPMorgan reported fourth-quarter 2013 results. Earnings per share came in at $1.30, which outpaced the Zacks Consensus Estimate by 4.0%. Prudent expense management and increased revenues were partially offset by higher provision for credit losses.

Additionally, JPMorgan has been downsizing its workforce to improve efficiency. Last month, the company announced plans to cut around 8,000 jobs (mostly in the Mortgage Banking division) and lower the number of branches (with increased used of ATMs and online banking).

Further, we believe that JPMorgan is fully prepared to face impending litigation issues, if any. Though these issues remained headwinds throughout last year, the bank continued to be profitable due to its strong fundamentals and business diversification.

However, JPMorgan’s revenue growth will likely be sluggish in the near term, given the persistent decrease in mortgage banking income and trading revenues. Moreover, the enforcement of new banking regulations will put further pressure on fee income. Additionally, litigations and various regulatory issues are expected to affect JPMorgan’s near-term results.

The Zacks Consensus Estimate for 2014 decreased nearly 1% to $5.98 per share over the last 60 days. Moreover, for 2015, the Zacks Consensus Estimate fell 1.4% to $6.38 per share over the same time period.

JPMorgan now carries a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked major regional banks include BB&T Corp. (BBT), Fifth Third Bancorp (FITB) and The PNC Financial Services Group, Inc. (PNC). All these stocks have a Zacks Rank #2 (Buy).

Read the Full Research Report on JPM
Read the Full Research Report on BBT
Read the Full Research Report on PNC
Read the Full Research Report on FITB

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