The settlement of most of the mortgage-related issues has
removed a substantial overhang for
JPMorgan Chase & Co.
). The stock closed at $56.86 on Dec 3, reflecting a year-to-date
return of 30.0%.
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Notably, continued synergies from business diversification,
consistent improvement in retail banking performance, cost
containment efforts and a strong capital position led to the
price appreciation. Given these factors, it seems that keeping
JPMorgan's shares in your portfolio will not be a bad idea.
However, we are not so optimistic about the above positives
translating into further price appreciation going forward as the
company's bottom line will be under pressure owing a stringent
regulatory environment and other investigations and litigations.
Hence, we discourage further addition of JPMorgan's shares to
Justification of Stance
Over the past several months, JPMorgan has settled many issues
that were plaguing it for a long time. The company is fully
prepared to meet the clauses of several other settlements that
will likely occur in the future. Further, the company is an asset
for yield-seeking investors, given its steady capital deployment
However, JPMorgan reported a loss in the third quarter due to
higher litigation reserves. Moreover, the company's top-line
growth is expected to slacken due to pressure on net interest
margin and enforcement of new banking regulations.
Additionally, over the last 60 days, the Zacks Consensus Estimate
for 2013 decreased 26.1% to $4.36 per share, while the Zacks
Consensus Estimate for 2014 fell 1.6% to $6.03 per share. As a
result, JPMorgan now carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked major regional banks include
Fifth Third Bancorp
). All these stocks have a Zacks Rank #2 (Buy).