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Nov 25 (Reuters) - Credit Suisse slashed its earnings estimates on banking heavyweight JPMorgan Chase & Co (JPM.N), citing deterioration of credit quality across all asset classes.
However, the company is expected to outperform its peers, driven by strength and stability in its senior management team, a strong balance sheet and competitive positioning, analyst Susan Katzke said in a note to clients.
JPMorgan is expected to earn 7 cents a share in the current quarter, compared with her earlier estimate of 48 cents a share, weighed down by higher loan losses, additional reserves for loans gone sour, and incremental mark-downs in its legacy leveraged loans and commercial real estate, Katzke said.
She also slashed her 2009 earnings estimate for the company by 14 percent to $3 a share to reflect the cost of higher consumer and corporate loan losses.
JPMorgan, which bought Seattle-based thrift Washington Mutual’s banking units in September, is highly exposed to consumer credit. Brokerages, including Fox-Pitt and Citigroup, have voiced concerns in the past few weeks about the bank’s heavy exposure to all areas of consumer credit.
JPMorgan has not had huge write-downs on risky classes of mortgage-related assets that other banks have reported because it has limited exposure to such securities.
But in recent calls with investors and analysts, Jamie Dimon, the bank’s chief executive, has been warning about possible losses from exposure to consumer debt.
Analyst Katzke, who rates the stock of the company “outperform”, said sustained share price outperformance relies on improving visibility of positive sequential earnings per share comparisons.
“We consider JPMorgan to be a core holding among financial services stocks.”
She however, cut her price target on the stock to a range of $45-$50 from $55 to reflect the estimate changes.
Shares of the company closed up 8 percent at $29.77 Tuesday on the New York Stock Exchange. (Reporting by Anurag Kotoky in Bangalore; Editing by Anil D‘Silva)