They say that before the big moment, there is always the chance that one gets nervous, or simply feels the jitters before the big moment. Not just individuals, it seems like large banking majors are also prone to similar circumstances, as seen in the case of JP Morgan (JPM, Financial). Even as the financial major happens to be the largest bank in terms of assets under management (AUM) worth $2 trillion, it is trimming down in parts, especially the student loan division. A recent restructuring had the company close down the student lending unit in Tampa, which would affect at least 65 people working there. Details reveal that the portfolio of student loans stood at $9.4 billion by the end of last year, which is a 9% dip from the previous year, thus urging the closure of the branch, and perhaps closure of the unit is also on the cards. Also, until a few years ago, the division of JP Morgan Chase, which was doing really well –Â the investment banking branch, needed some cuts going into billions of dollars, followed by a restructuring process as was reported in the earlier part of March 2015. But there are some valid points which speak volumes on the promising future of the investment bank. Let’s visit the upcoming sections to get an idea on these discussion points.
The brighter side of the story
On the more optimistic side, JP Morgan Chase has seen the numbers climb up this year by a substantial margin. The EPS in 2015 has been projected to be around 5.76 up from 5.29 in 2014. Even though they have the lowest price-to-earnings ratio (among U.S. banks) of 10x, it is expected to climb to 12x in 2016, which could push up prices of the stock to $80, from the current $60.96-$61.00 price range. Some skeptics in the industry felt that the bank would do best if the different divisions were broken up. But Jamie Dimon , the noted CEO of JP Morgan Chase, suggests that the four divisions move in synergy and are responsible for the $18 billion in annual revenues, which takes care of the stability factor.
Some other credentials showcasing the company’s stronghold
JP Morgan Chase had their investors' day recently, where they promised a return of 15% on tangible equity held by any investor, which follows the 13% returns they put up last year. Mike Mayo from CLSA Securities quipped about the event, saying “If there was a theme to investor day, it was Taylor Swift’s song, Shake it Off. The message to the regulators was: Throw at us what you will; we still can generate a 15% return on equity." This translates into strong investor sentiment for the bank. JP Morgan Chase has been satisfying shareholders to the maximum possible extent, as it improved its annual dividend to $1.76 per share recently, while the stock yields a maximum of 3% yield in comparison to its industrial competitors.
Towards mid-April, when the first quarter earnings of the fiscal year 2015 will be announced, analysts are hoping that the earnings per share would be $1.40 per share for the quarter, which would be a significant jump from last year's $1.28 a share.
Final thoughts
JP Morgan Chase has some short term jitters to take care of. There was a recent dip in stock price by 3.56%, but the other numbers look expectedly healthy. From the PE Ratio of 11.52, a dividend yield of 0.40%, and the 90-day trading volume at 20.61 million, JP Morgan Chase is going stronger than its own average of 15.20 million. Talking about the industry focus, 10 rating firms have suggested a "hold" rating, whereas 30 of them see the stock as a "buy" option, which was revealed by Bloomberg's research recently. The general consensus of the stock price over a 12-month time frame has been put at $68.54, which is a bit high considering the current range being within $61. But having the firm credentials, and the fact that the bank is seeing a strong shift in the consumer banking segment, it should not be a surprise to see changed estimates in the future, and also a price breach from the current expected price. Also the investment banking division is trimming down and the student credit lending business may be shut down at some stage sooner than expected, which means that the returns for shareholders will be high, prompting the investors to "hold" the stock in the medium term and to "buy" the stock in the longer term.
