While the possibility of breaking up JPM is quite low, there exists substantial upside for investors should it occur, says KBW's Chris Mutascio. The businesses - traditional banking, asset management, and private equity - are together worth $255.7B, he estimates, versus the current $197B market cap.
Getting back to reality, Mutascio turns his focus on the ever-increasing scope of lawsuits and investigations facing the bank. While the costs from these are potentially "high and uncertain," the bank can "easily earn through them."
The investigatory toll on JPMorgan is seen in the stock's underperformance against a broader bank index (KBE) of late, but rather than buying other banks on the hope short-term rates (and net interest margins) will rise, why not buy JPM shares at a discount and wait for the litigation storm to pass, says Mutascio.