JP Morgan Chase Co. Ticker: JPM

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JP Morgan Chase Co.Ticker JPM

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JP Morgans Businesses

• JP Morgan Operates in Six Divisions
• Investment Banking
• Provides advisory risk management services
• Retail Financing Services
• Provides Home Finance, Consumer and Small
  Business Banking and Insurance
• Card Services
• Provides general purpose credit cards in the
  United States
• Commercial Banking
• Provides infrastructure for corporations,
  municipalities, financial institutions and
  not-for-profit entities
• Treasury and Securities Services
• Provide cash management service
• Asset and Wealth Management
• Provides investment management to retail and
  institutional investors, financial
  intermediaries, high-net-worth families and
  individuals globally

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JP Morgans Businesses (Contd)

• The Group serves more than 90 million customers
  nationwide in addition to corporate,
  institutional, and government clients.
• As of December 31, 2007, it operated through over
  3,000 branches and serviced more than 9,000 ATMs
  in 17 states.
• Based on its size and the businesses it services,
  the banks primary competitors are Bank of
  America Corporation (BAC), Citigroup Inc. (C),
  and Merrill Lynch Company, Inc. (MER)

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Financial Indicators

• Key Statistics
• P/E (ttm) 13.25
• EPS (ttm) 3.71
• Profit Margin (ttm) 21.95
• Average Volume 39,661,400
• 52-Week High 53.25
• 52-Week Low 36.01
• Dividend Yield 3.2
• Annual Yield 1.52
• Annual Revenue 104B
• Institutional Ownership 71.3

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Revenue EPS
Annual Revenue
Annual Earnings Per Share
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Why JP Morgan?--Statistical Rationale

• Investment Rationale/Risk
• Statistical Rationale
• SP Recommendation is a 5-star, Strong Buy, and
  likewise places JPMs qualitative risk assessment
  at Low, citing strong fundamentals and solid
  credit quality. This means that the total return
  is expected to outperform the total return of the
  SP benchmark by a wide margin.
• JP Morgans large consumer base and capital ratio
  of 8.3 will give it flexibility to move toward
  higher growth products and markets.
• JP Morgans Balance Sheet is quite strong,
  particularly relative to its peers
• Its reserve ratios totaled 2.2 of loans, which
  also place JPM near the top of its competitors.
• Expected double-digit growth in average earning
  assets, as JPM should gain a larger market share
  in most of its businesses due to the exit of
  weaker parties.
• Net interest income should grow into double
  digits, reflecting a more favorable interest rate
  environment.
• This opinion, given by SP analysts, is only
  strengthened by Wednesdays rate cuts, which will
  help the banks profitability in its core
  operations

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Why JP Morgan (Contd)

• Quantitative contd
• Historically low P/E levels help, though this is
  not specific to JP Morgan, rather the
  sub-industry as a whole.
• In analyst opinion, stock price to reach 53.00
  over next year. Despite our desire for long-term
  gains, this should not be overlooked.
• Dividend payments have historically been regular,
  generally at .38/share

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Why JP Morgan - Broader Concepts

• Broader Rationale
• JPMs large consumer base and its diversity in
  its geographic presence and product offerings
  provide significant protection from a local or
  regional downturn.
• Balance sheet! JPMs balance sheet is remarkably
  strong. Its level of capital provides outstanding
  reserves against future exposure to the next
  version of the sub-prime fiasco.
• Jamie Dimon
• CEO Jamie Dimon has proven his outstanding
  leadership over the past few years. He has built
  his executive leadership and solid foundational
  balance sheet specifically to exploit a crisis
  such as the current one. Additionally, he now has
  the reputation as the world banking leader, and
  will get the benefit of the doubt in the future
  as a result.
• Whats more, now that he has acquired Bear
  Stearns (and subsequently is firing mass
  employees from the former firm), he has the
  opportunity to choose from the best and brightest
  that Bear had to offer.

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Why JP Morgan - Broader Concepts contd

• Bear Stearns acquisition
• Since its recent acquisition , JP Morgan has
  raised the price of Bear Stearns stock to 10
  from 2. A successful completion of this
  acquisition would give JPM a leading market share
  in the global prime brokerage business. In
  addition, it would strengthen JPMs equities
  execution capabilities and market share.
• With the massive support that JPM has been given
  by the Fed, which protects roughly 30 billion of
  Bear Stearns weakest assets, one can safely say
  that the purchase price is inexpensive and adds
  value to the JP Morgan franchise.

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Risks and Hesitation

• Stay away from the financial sector entirely, for
  clear reasons.
• Risks
• Simply put, sub-prime exposure and recessionary
  fears.
• We can anticipate further pressure in JPMs
  market sensitive business in 2008, as the
  environment remains challenging as a whole.
• Revenue is expected to decline 3.5 in 2008,
  largely due to securities write-downs.
• JPM still has significant exposure to leveraged
  loans and Alt-A securities, and while we still
  expect further write-downs in the coming quarter,
  though they will be at lower levels than in Q1 of
  2008.
• While we cannot be sure of the exact exposure,
  Sandler ONeill stated, J.P. Morgans credit
  quality metrics remain resilient and sub-prime
  mortgage exposure seems manageable with 20
  million in net charge-offs on a 9 billion
  portfolio.

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Risk
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Peer Analysis
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Industr y Comparisons
-SP Compustat