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JPMorgan Deteriorating: Hold, But Have Finger On The Sell Button
- Earnings quality is not great.
- However, rays of light exist in several divisions and the balance sheet.
- Time will tell if momentum returns, so for now, hold.
Probing Further Into JPMorgan: Strong Results Dampened By Federal Investigation
- JPMorgan is facing a new probe into price-fixing activities in its foreign exchange trading business.
- As a result, JPMorgan upped its potential costs for legal expenses by $1.3 billion and reduced Q3 earnings results.
- Overall, recent results were positive, showing a shift back to profitability.
- We are encouraged by this growth; however, suggest investors also consider peers, such as GS, who are taking to increase transparency and accountability, as well.
- JPM shares have underperformed for the past year, but results are strong, meaning investors can buy a great company at a good price.
- The consumer bank is posting moderate loan growth, the investment bank has top market share, and asset management is growing revenue and expanding margins.
- Shares are now slightly below book value and less than 10x earnings, making now an attractive entry point.
- Throughout 2014 the stock has experienced some really bad news and it is still flat during the past year.
- The dividend has a lot of room to grow with a current payout of just 30%.
- If interest rates begin to rise next year as anticipated, we can see a rise in the share price of the stock.
JPMorgan's Swelling Legal Provisions Did Not Undermine Strong Q3 Performance
- JPMorgan had to spend $1 billion on legal expenses due to forex market rigging investigation but the company still managed to convert its losses over the previous year into profits.
- The company achieved this by playing to its strengths and generating revenue from investment banking, fixed income markets, deposits and credit card sales.
- JPMorgan took pride in its cost cutting measures as it sought to automate to save costs. The company is currently facing competition from tech giant Apple.
- JPMorgan has stood tall over the years and has repaid investors’ faith, does make a worthy investment prospect, if not for the short term then definitely for the long term.
JPMorgan Q3 2014 Earnings: As In-Line As It Can GetWestEnd511 • Wed, Oct. 15
- Headline EPS missed consensus but adj EPS actually came in-line.
- In-line revenue thanks to IB and better than expected loan growth.
- Continue to favor TD and BAC due to lower wholesale exposure and earnings recovery story.
Update: JPMorgan Earnings Miss EPS By $0.03, But Beat Revenues By 2.0%
- JPM missed increased earnings forecasts, but reported progress in core loans, auto origination and investment banking.
- EPS reflects continued improvement and was in-line to slightly positive compared to my forecast.
- Maintain a "Buy" on JPM, especially as 2015 and 2016 earnings forecasts continue to increase.
Whisper Number Impact: What Will JPMorgan's Shares Do Post Earnings?
- The whisper number is $1.37, one cent behind the analysts' estimate.
- JPMorgan has a 74% positive surprise history (having topped the whisper in 37 of the 50 earnings reports for which we have data).
- The overall average post earnings price move is 'opposite' (beat the whisper number and see weakness, miss and see strength) when the company reports earnings.
- JPMorgan Chase is scheduled to report 3Q 2014 earnings before the bell on Tuesday, October 14th.
- Earnings Per Share: The current Street estimate is $1.38 per share (range: $1.30 to $1.50).
- Revenues: The current Street estimate is $23.99 billion, a 0.50% increase from the year-ago period.
JPMorgan Sells Health Savings Account Business To Webster Financial - A Win For BothStock Gazer • Wed, Oct. 1
- WBS and JPM came to an agreement about the purchase and sale of HSA. The deal involves the sale of almost 700,000 accounts to Webster Financial’s HSA Bank division.
- JPMorgan had announced plans of streamlining its business and intended to achieve that goal by selling some of its non-core business units which included the prepaid card business.
- JPMorgan does not expect any adverse effects on its earnings. The company does not anticipate any changes to the revenues and profits it earns because of this deal.
High-Yielding JPMorgan Appears To Be Overbought At These Levels
- The stock is inexpensively valued on 2015 earnings estimates, and the estimates have increased in the past month.
- The stock has had a nice price increase over the past couple of months though, getting it to overbought territory.
- I'm going to wait another month before putting more capital to work in the name.
JPMorgan: A Solid Value In This Fully Valued Market
- It is getting harder to find bargains in the market with the S&P 500 hovering at the 2,000 level and with stocks going for 16-17 this year's earnings.
- I am lightening my exposure to REITs and increasing my allocation to major banks as net interest margins should benefit as interest rates look to rise from here.
- One major bank that is offering solid value in a fully valued market is JPMorgan. Why I expect the shares to rise 12% to 15% is highlighted below.
- JPMorgan Chase has been re-establishing both its business and dividend payout since the recession.
- As such, shares presently trade with what appears to be both a reasonable “current” yield and valuation; leading to a baseline 10% total return expectation.
- However, as there are many factors that lead to this insight, this commentary gives the readers the tools to come to that conclusion on their own.
- First, we'll take a look at the terms of the warrants, including the initial strike price, expiration date, and adjustment formulas.
- Next we'll try to find a reasonable forward valuation for JPMorgan's common stock through late 2018.
- Lastly, we'll compare the returns of the warrants to the returns of the common stock.
- JPMorgan recently struck a deal with AlpInvest Partners and Lexington Partners to sell its roughly 50 percent stake in the portfolio of One Equity Partners.
- One Equity produced $36 million in revenue in Q2 2014, down from $410 million the previous year, during a peak for global deals.
- In contrast, other P-E rivals, such as KKR, have seen strong growth YTD in a favorable environment.
- As JPMorgan could not bring its P-E arm up to speed, along with its poor results so far YTD and legal woes, we reiterate our negative stance on the firm.
- JPM recently announced its legal reserves have risen dramatically to $4.6 billion.
- This could reduce the amount available to pay shareholders as JPM's dividends struggle to return to pre-financial-crisis levels.
- JPM saw a 8% decline in earnings, slowed down by decreased mortgage lending in Q2, while rival GS posted 5% growth.
- We suggest investors consider alternatives to JPM moving forward in 2014.
- The decreasing return on equity ratio continually troubles me.
- Settlements and lawsuits from the financial crisis continue to haunt the company.
- All that said, the stock is inexpensively valued with respect to 2015 earnings estimates.
JPMorgan Revisited: Still Cheap And Attractive At These Levels
- JPMorgan shares are still trading below fair value.
- The bank's yield and excellent management make it a buy.
- Although shares have closed the value gap somewhat there is still plenty of room to run.
Mon, Nov. 17, 8:05 AM
- Dag Skattum spent more than two decades at JPMorgan (NYSE:JPM), eventually rising to co-head of global M&A in 2006, before exiting along with the boom in 2007. After six years at P-E firm TPG, he's returning to the bank as vice-chairman of EMEA. Among his roles will be leading a strategic advisory council that will help mentor JPMorgan's future dealmaking stars.
- It's the latest in a series of European hires for JPMorgan which is looking to overtake Deutsche Bank as #1 in investment banking fee rankings for the region.
Sat, Nov. 15, 5:00 PM
- JPMorgan (NYSE:JPM) has settled a lawsuit by Texas mineral-rights owners who accused the bank of cheating them of $681M in compensation for drilling rights in the Eagle Ford Shale.
- The case went to trial Nov. 12 after deal talks stalled.
- The jury has now been excused. The Trust's lawyer believes "a sufficient number of beneficiaries" will now sign the settlement.
- Source: Bloomberg
Thu, Nov. 13, 10:17 AM
- Real sweethearts if you believe the reports, the likes of JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C), and Synchrony Financial (NYSE:SYF) are being investigated by the Feds for still going after borrowers after their debt has been legally discharged in a bankruptcy.
- Paying little attention to such court-ordered discharges, the banks reportedly are keeping the debt alive on credit reports, more or less attempting to force borrowers to pay on bills which they no longer owe.
- The issue, say sources, is the way banks report to credit agencies. Once a debt is voided through bankruptcy, creditors must update credit reports showing that debt is cleared. Banks, however, routinely fail to do so, instead leaving notations of "past due" or "charged off." A clerical mistake would be one thing, but, according to a number of bankruptcy judges,, banks refuse to make corrections unless the borrower pays.
- The banks contend they are complying with all federal laws in their collection and sale of debt. Class-action suits have also been filed and the banks are trying to have them thrown out, arguing its third-party debt buyers who are in control.
Wed, Nov. 12, 10:32 AM
- In what appears to be in addition to the already-announced global $3.4B fine for banks over forex manipulation, the OCC announces $950M in penalties against Bank of America (BAC -0.6%), JPMorgan (JPM -1.1%), and Citigroup (C -0.7%) for "unsafe or unsound" practices related to their forex trading operations.
- BofA will pay $250M, JPM $350M, and Citi $350M.
- Previously: Global banks fined $3.4B in forex probe
Wed, Nov. 12, 2:24 AM
- Global regulators have fined five major banks, including UBS (NYSE:UBS), HSBC (NYSE:HSBC), Citigroup (NYSE:C), Royal Bank of Scotland (NYSE:RBS) and JPMorgan (NYSE:JPM) a total of $3.4B over allegations of price fixing and manipulating benchmarks in the $5T-a-day foreign exchange market.
- The penalties were imposed by Britain's Financial Services Authority, the U.S. Commodity Futures Trading Commission and Swiss regulator FINMA.
- Barclays (NYSE:BCS) had been expected to be part of the settlement but the FCA said its investigation into the U.K. bank was continuing.
Tue, Nov. 11, 4:47 PM
- "The exchanges (apparently ICE's NYSE and NDAQ) who have a hand in this and seek to benefit from the onerous version of a trade-at basically put the screws to us," says Michael Masone, legal counsel for equities at Citigroup (NYSE:C), speaking at a SIFMA-sponsored conference.
- At issue is a SEC pilot program meant to boost trading in smaller-cap names. One of the provisions - the so-called "trade-at" rule - is a stealth attempt at hurting brokerages which run private trading systems (dark pools), said both JPMorgan (NYSE:JPM) and Citi at the conference.
- The one-year program - if approved (the SEC began seeking public comment this month) - would begin next year and widen the minimum tick at which bids and asks are quoted on exchanges to more than a penny. The plan would create four groups of companies with market caps of less than $5B. One segment would require quotes in increments of a nickel or more, and another will require both quotes and trades to be in five-cent steps. In a third group, trading will be discouraged in dark pools. A fourth group would trade normally.
- Opposition has been pretty fierce - even within the SEC - but the agency for now has decided to move forward anyway.
Tue, Nov. 11, 3:00 PM
- "Capital allocation decisions are probably getting the most airtime right now," says Chris Ventresca, global co-head of M&A at JPMorgan (NYSE:JPM), after being asked what's being talked about in corporate boardrooms at the moment.
- An optimistic lot, M&A bankers have for several years predicted an M&A boom in the face of continued lackluster action. This year though, the gap between bankers' pipe dreams and reality is perhaps the narrowest since the financial crisis, writes the WSJ's Maureen Farrell, and Ventresca expects the elevated level to continue.
- For buyers, says Ventresca, there's a disconnect between their ability to drive growth and what shareholders/markets expect, so acquisitions are a key tool. And sellers are more receptive because a multi-year bull market means they're not selling at anywhere near the bottom.
Tue, Nov. 11, 9:47 AM| Comment!
Mon, Nov. 10, 3:39 PM
- The lucrative prepaid card business may already getting less so thanks to the entrance of gorillas like JPMorgan (NYSE:JPM) and American Express (NYSE:AXP) into the industry, but alongside that threat is the CFPB.
- Unable to cap fees, the fast-expanding D.C. agency is set this week to propose new rules mandating clearer disclosure of fees, and to make it easier for consumers to compare across cards.
- “We’re generally in compliance with what we expect the regulation to be,” says Meta Financial (NASDAQ:CASH) President Brad Hanson, and he believes the better disclosure "helps legitimize the industry."
- Around 8% of U.S. households use prepaid cards, but that rises to 22% when just looking at those without bank accounts. Less than a $20B business six years ago, the amount put on prepaid cards should near $100B this year.
Mon, Nov. 10, 1:52 PM
- The JPMorgan Diversified Return International Equity ETF (NYSEARCA:JPIN) seeks to provide investors risks-adjusted returns through international equity exposure with a focus on lower volatility.
- The ETF will track the FTSE Developed ex-North America Diversified Factor Index, which employs a unique risk framework and multi-factor stock filter.
- "We believe that JPMorgan (NYSE:JPM) has unique investment insights and international capabilities that will be attractive to ETF investors, and this product is an important additional step in delivering those capabilities," said Robert Deutsch, head of the ETF business for J.P. Morgan Asset Management, in a press release.
- JPIN is fairly similar to the JPMorgan Diversified Return Global Equity ETF (NYSEARCA:JPGE), JPMorgan's first ETF, which began trading earlier this year.
- Other International equity ETFs: VEU, VXUS, SCHF, IXUS, ACWX, CWI, GWL, ACIM, AADR, RTR, VIDI, DBAW
Fri, Nov. 7, 11:24 AM
- The bank's target per its 2014 investor day was for 2K job cuts in the card, merchant services, and auto unit, and 6K cuts in mortgage banking, but - presenting today at an investor conference - CEO Consumer & Community Banking Gordon Smith says there should be additional reductions of 3K in the two divisions.
- JPMorgan (NYSE:JPM) expects to exit 2016 with expenses in the combined units $2B less than they will be this year.
- Webcast and presentation slides
Thu, Nov. 6, 10:59 AM
- Its investment banking fees in Europe lagging industry peers, JPMorgan (NYSE:JPM) in 2004 bought a 50% stake in U.K. investment bank Cazenove Group (and bought the rest of the company in 2010; total cost of about £1B). Today, JPMorgan's investment banking market share in the U.K. is 9.8%, up from 6.5% in 2012, making it one of the bank's faster-growing markets, and boosting its overall European share.
- Jamie Dimon hopes to soon pass Deutsche Bank in the European investment bank tables - its market share of 7.4% is just 30 bps less than Deutsche's. In 2010, Deutsche had a 100 basis point lead.
Mon, Nov. 3, 5:56 PM
- From JPMorgan's (NYSE:JPM) Q3 10-Q: "DOJ is conducting a criminal investigation, and various regulatory and civil enforcement authorities ... are conducting civil investigations, regarding the Firm’s foreign exchange ("FX") trading business. These investigations are focused on the Firm's spot FX trading activities as well as controls applicable to those activities."
- JPMorgan has hiked the upper end of its estimate range for the "reasonably possible losses" it could see from legal matters by $1.3B to $5.9B.
- Citi and UBS are among the other banks facing DOJ forex probes. JPMorgan's Q3 legal expenses totaled $1.01B, with much of the spending related to currency investigations.
- JPM -0.9% AH.
- Previous: Banks brace for FX settlements
Fri, Oct. 31, 10:38 AM
- Royal Bank of Scotland (RBS +4.8%) is the latest to do so, today announcing the setting aside of $640M for potential settlements in the currency-rigging investigations.
- In total, seven major U.S. and European banks have boosted their legal reserves by $6.5B in October. Last night, Citigroup (C +0.4%) was forced to cut its Q3 earnings by $600M amid "rapidly-evolving" probes.
- UBS has put aside the most of any single bank this month - $1.9B. Next in line is Deutsche Bank (DB +0.7%) with $1.1B, and JPMorgan (JPM +1.3%) with $1B. None of the lenders disclosed exactly how much was specifically for foreign exchange, and none have yet been formally accused of wrongdoing.
- Barclays (BCS +5.6%) reserved $800M for FX-related settlements, and Credit Suisse (CS +0.5%) $400M.
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, IAI, SEF, IYG, FXO, FNCL, FINU, RWW, RYF, FINZ
Thu, Oct. 23, 4:49 PM
- Not having had the pleasure of being subject to the stress test and CCAR previously, Deutsche Bank's (NYSE:DB) U.S. unit will be a participant next year
- As in prior years, those BHCs with large trading operations - BAC, C, GS, JPM, MS, WFC - will be required to factor in a global market shock as part of their scenarios.
- Those six, plus STT and BK - thanks to their custodial operations - will be required to incorporate a counterparty default scenario.
- Among the items in the severely adverse scenario is the unemployment rate jumping to 10%, a 60% dive in the stock market, and oil jumping to $110 per barrel (how about oil falling to $10 per barrel?).
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, IAI, SEF, IYG, FXO, FNCL, KBWB, RKH, QABA, FINU, KCE, KRU, KBWR, RWW, RYF, KBWC, FINZ, KRS
Wed, Oct. 22, 3:43 PM
- Emails from 2011 show legal and compliance executives in New York were alerted JPMorgan's (JPM -0.5%) hiring of the offspring of senior Chinese officials helped to win it investment banking business, reports the WSJ. This was more than a year before U.S. authorities began their investigation.
- The emails show JPMorgan officials dismissed the accusations, but nevertheless proposed changes to the bank's hiring practices in the region.
- JPMorgan hasn't yet been officially charged with any wrongdoing, but the SEC is investigating "what executives knew and when they knew it." The breadth of any enforcement action is likely to closely follow how high up the JPMorgan organization chart the SEC can show awareness of misconduct, says a law professor.
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