Following a meeting with CEO Jamie Dimon on Feb. 6, Citigroup analyst Keith Horowitz believes that JPMorgan Chase & Co. (NYSE: JPM) could be among the first banks to repay its indebtedness under the government's Troubled Asset Relief Program (TARP).
"Clearly there is a risk of future government interference, which is why we believe management would like to get out," noted Horowitz. However, while Dimon thinks banking industry returns will be compressed during the intermediate term due to the government's involvement, he doesn't see any significant changes to JPMorgan's long-term outlook.
Dimon also defended his company's dividend, calling it an "important obligation" to shareholders. The CEO assured Horowitz that any dividend cut would be executed as an offensive strategy, rather than defensive, and he would be very careful to show investors "compelling use" for that capital.
The Citigroup analyst maintains a Hold rating and a $23 price target on JPM. This estimate represents a discount of 16.8% to the stock's closing price last Friday. Most brokerage firms are equally skittish; Zacks reports six Holds and one sell, compared to four Strong Buys and one Buy.
On the charts, JPM is battling resistance from its 10-week moving average. This sharply descending trendline has smacked the shares consistently lower since mid-October.
Despite the security's extended decline, calls have been the option of choice among investors on the International Securities Exchange (ISE). Traders here have bought to open an average of 1.78 calls for every put during the past 10 days, as bullish bets have been nearly twice as popular as their bearish counterparts. Judging by JPM's weak price action, this recent influx of optimism may prove to be premature.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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Reader Comments (Page 1 of 1)
2-10-2009 @ 9:51PM
Dwight Maxwell said...
I have just recently discovered Chase has been charging me a $20.00 miscellaneous fee each month on my mortgage. For a few months in 2008, I could not keep up with my mortgage payments. I was turned down for a loan modification by Chase, because " I didn't make enough money". A few months ago, I found a job and I have been able to bring my mortgage up to date. My reward - those bastards raised my rate a full point. Chase bought my mortgage and has been making my life miserable since. I don't believe this "Miscellaneous fee" is legal. And I don't believe I'm their only victim. I would be interested in joining a class action suit against JP Morgan. Anybody have any info on an ongoing suit? Thanks!