JPMorgan Chase & Co. won’t have a “major loss” in 2012 following the lender’s disclosure of losses from credit derivatives that could amount to more than $2 billion this quarter, Richard Bove said.
“We’re not expecting JPM to run a major loss,” Bove, an analyst with Rochdale Securities LLC, said today in a Bloomberg Television interview with Tom Keene. “I don’t believe that there’s any likelihood that the liquidity of the company is going to be affected by this.”
Shares of JPMorgan, the biggest U.S. bank by assets, fell after the New York Times reported the lender’s trading losses from credit derivatives may eventually total as much as $9 billion, or more than four times the firm’s initial estimate. JPMorgan Chief Executive Officer Jamie Dimon has said the New York-based bank doesn’t want to “do anything stupid” by unwinding the trades too quickly and hopes “this won’t be a significant item for us” by the end of the year.
“That would suggest that in 2013 JPMorgan will earn $22 billion,” Bove said. “If it earns $22 billion in that year, it will make more money than any other bank in the world. Plus, it will make more money than any other company in the United States except five or six.”
JPMorgan’s losses have increased in recent weeks as the lender sought to exit the holdings, the Times reported, citing unidentified former traders and executives at the bank. The disclosure of the trades is a “negative development,” Bove said. Still, it would be a “terrible mistake” to have the one-time loss change perceptions of JPMorgan, he said.
“If this company has got earnings power in the $22 billion range, how bad can it be?” Bove said.
JPMorgan dropped 3.8 percent to $35.40 at 9:32 a.m. in New York. The firm’s shares gained 11 percent this year through yesterday.
JPMorgan is perceived to be the second-most creditworthy of the six biggest U.S. banks, according to credit-default swap prices compiled by Bloomberg. The cost of the contracts, which protect investors against default on JPMorgan’s debt, is less than any of those lenders except for San Francisco-based Wells Fargo & Co., the data show.
Credit-default swaps on JPMorgan eased to 139.3 basis points today, from 172.1 basis points on June 12, the data show.
That compares with the average of contracts on JPMorgan, Wells Fargo, Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley of 237.9 basis points through yesterday, the data show. A basis point is 0.01 percentage point.