JPMorgan Chase & Co. (JPM) Analyst: Wesley Kress
Recommendation: HOLD 1. Reasons for the Recommendation
Estimated Fair Value: $60 – $80*
Reason #1 Key acquisitions and a strong capital position will allow JPMorgan the ability to continue to pursue growth and gain market share domestically. JPMorgan is believed, under interpretation of the new Basel III capital standards, to be in excess of the amount of the tier 1 common ratio. JPMorgan currently has a ratio of 7.6%, which management believes will be enough for the additional surcharge supposedly to be required for “global systemically important banks” (GSIBs), this allows for great financial flexibility.. JPMorgan has been able to take advantage of an industry plagued with difficulties. In 2008 at the peak of the financial crisis, JPMorgan was able to further increase its market share and size by acquiring Bear Stearns in September 2008. JPMorgan also further strengthened its market share in their Retail Financial Services business, which makes up over 30% of their revenue with the acquisition of Washington Mutual Bank’s banking operations. JPMorgan recently acquired a commodities trading firm RBS-Sempra Commodities LLP for $1.6 billion. The acquisitions stated above have and are believed to continue to create meaningful revenue opportunities, strong client inflows, cost synergies that are of major significance, and continued growth in investment and credit card products. Reason #2 JPMorgan’s presence in over 60 countries and their continued ability to acquire new market share globally. Management has continued to seek significant opportunities globally that are presented in countries that are rapidly growing and are need of a strong bank in order to facilitate and support continued growth. JPMorgan recently acquired a majority stake in a Brazilian hedge fund, which is one of the emerging market countries poised for high growth. Management believes this acquisition will continue to grow its ever-expanding...