Tuesday, 14 October 2014

A quick look at...JP Morgan's numbers

Having taken a quick look at the Citigroup numbers (link here), what about JP Morgan's?  For the latter I talked about a US$60 target price back in July (link here).  Interestingly despite some firm markets for financials since then the share has struggled to decisively break that US$60 level since and today stands, as it did in July, around the US$56 level:


So what about value today?  Well a 13% return on tangible equity...


...on a US$44.13 book I would value at US$57.4 (US$44.13 * 1.3).  So despite all the solid risk ratios below at face value I would rate the shares as fair value at prevailing.

Except, of course, that 'results include a $1B, or $0.26 per share legal charge...related to the investigation over foreign-exchange trading'.  So a 19% drag on earnings?

So how much really is a one-off and how much will always be there due to the variable business of running a multi-faceted bank?  If we assume half...then a fairer value for JPM shares could be in the US$62s...

That is a big IF given some of the issues in financials but my instinct is that a return to the (see the chart above) historic support level of US$54 equates to a buying opportunity in the stock / return to US$60+ scope.  

Patience. 

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