JPMorgan Down on '$9 Billion' Loss Estimate (Update 1)
Based on a 30-cent quarterly payout, the shares have a dividend yield of 3.26%.
At Wednesday's close, the shares traded just above their reported March 31 tangible book value of $34.91, and for less than seven times the consensus 2013 earnings estimate of $5.32 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $4.34.
Stifel Nicolaus analyst Christopher Mutascio has a "Hold" rating on JPMorgan Chase, and said on Thursday morning that he has "no idea if the $9 billion figure reported in the article is accurate," but if that loss figure "is spread out over a few quarters, then the company could still remain profitable on a quarterly basis," since the firm has "posted net income ranging from $3.5-$5.0 billion (after preferred dividends)."
The analyst went on to say that "if the company is solidly profitable in 2Q12 and the $9 billion figure is accurate and absorbed in one quarter, then it suggests to us that the company is harvesting a substantial amount of the previously disclosed $8+ billion in unrealized investment securities gains to at least partially offset the losses from the unwind of the hedge."
Mutascio thinks that "the real focal point for 2Q12 earnings should be net interest income," and not the trading losses, since proceeds from a large sale of investment securities to harvest unrealized gains would have to be reinvested at the lower rates prevailing in the market. Therefore, "the bigger long-term risk (more permanent risk) to earnings at JPM is not the losses from the unwind of the hedge - rather, it could be the potential reduction in net interest income levels from de-risking the CIO investments into low yielding securities/assets."
Wells Fargo analyst Mathew Burnell later on Thursday said that although his firm was ânot revising our $5B CIO loss estimate at this time, we estimate that every incremental $1B in losses would reduce our EPS estimate by $0.18 assuming a 30% effective tax rate and no offsetting actions (such as the realization of portfolio gains).