Wednesday, April 29, 2015

Seeking Alpha: JPMorgan's Scale Remains Both Its Boon And Bane

Banks don't get much larger, much more complex, or much more central to their ecosystem than JPMorgan Chase (NYSE:JPM). JPMorgan's scale gives it considerable operating advantages, but it comes at the cost of greater regulatory scrutiny and higher capital requirements. While JPMorgan's trading, investment banking, and commercial banking operations are helping it through a weak stretch in consumer banking, the higher capital requirements are going to increase the pressure on management to cut costs, improve returns, and restructure business relationships and failing to execute on these moves will result in disappointing returns for shareholders.

I continue to believe that JPMorgan is the best-run bank in its weight class and still a stock worth owning. I continue to value the company on the basis of returns on equity below what management believes it can achieve, but that nevertheless support a fair value above $67 today. While there are risks of further regulatory and legal challenges to the bank and a more protracted period of lackluster rates, I believe the risk-benefit balance continues to favor owning these shares.

Follow this link for the full article:
JPMorgan's Scale Remains Both Its Boon And Bane

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