(Adds details, background, analysts’ comments)
Jan 17 (Reuters) - Oppenheimer downgraded JPMorgan Chase & Co (JPM.N) to “perform” from “outperform,” while Bear Stearns cut its price target on the No. 3 U.S. bank, a day after the company’s quarterly profit fell a worse-than-expected 24 percent.
Bear Stearns reduced its 2008 estimate on the company to $4.50 per share from $5.00 based on expectations for higher consumer credit costs, weaker investment banking results, and lower gains from private equity investments.
Analyst David Hilder who has an “outperform” rating on JPMorgan, cut his price target on the stock to $52 from $58.
JPMorgan’s results were in “stark” contrast to Citigroup’s (C.N) Hilder said in his note to clients. Citigroup, which has more assets, lost $9.83 billion in the fourth quarter, compared with JPMorgan’s profit of nearly $3 billion.
“By adhering to the principles of building a strong balance sheet and improving profitability and risk management, CEO Jamie Dimon has put JPMorgan in position to enjoy the flexibility of an 8.4 percent Tier 1 capital ratio, while Citigroup was raising $22 billion of new capital at the cost of more than 12 percent dilution to current shareholders,” Hilder wrote.
Despite weak numbers investors rewarded JPMorgan for turning a profit, while some U.S. banks post huge losses from bad debts on subprime mortgage-related securities. JPMorgan’s stock ended up almost 6 percent at $41.43 Wednesday on the New York Stock Exchange.
Oppenheimer analyst Meredith Whitney said the downgrade was due to the sudden but dramatic rise in consumer losses. “The worst thing about JPM is its high U.S. consumer exposure, as we believe we are headed into a recession,” she added.
Whitney also cut her 2008 earnings-per-share estimate to $3.90 from $4.70 on the bank and lowered its 2009 estimate to $4.35 a share from $5.10. (Reporting by Nivedita Gupta in Bangalore; Editing by Pratish Narayanan)