JPMorgan Has Double Digit Downside: Analyst

NEW YORK (TheStreet) -- Sterne Agee analyst Todd Hagerman on Monday said that he saw "10-15% further downside risk" to broker/dealer stocks, with "perhaps more for JPM as the review of the company's trading losses unfolds."

As the intense reaction continued, following JPMorgan Chase (JPM) CEO James Dimon's announcement late Thursday of a $2 billion second-quarter trading loss, the company announced on Monday that Chief Investment Officer Ina Drew had resigned.

Following a 9% decline on Friday, to $36.96, JPMorgan Chase's shares down another 3% in early trading Monday, to $35.98.

Hagerman said that investors were "stunned by the announcement, particularly considering most investors have some ownership position in JPMorgan Chase, particularly as a hedge against other potential risks tied to the broker/dealers as a whole," and that aside from some investors who were "more optimistic on the company, looking for a buying opportunity at or below tangible book value ($34.19)," most investors "most investors were decidingly more negative on not only JPM, but also the broker/dealers as a whole."

The increased risks for the broker/dealer space, according to Hagerman, include "the likelihood of more severe downgrades by Moody's next month, ongoing Eurozone risks, accelerating rules and toughened Fed position towards policy surrounding the Volker Rule, as well as likely diminishing revenues and profitability."