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Dec 15 (Reuters) - JPMorgan Chase & Co’s (JPM.N) near-term earnings are likely to remain under pressure from worsening consumer and corporate credit said a Merrill Lynch analyst, who forecast a fourth-quarter loss and cut his rating on the stock.
The largest U.S. bank’s shares were trading down 6.3 percent at $28.92 in morning trade on the New York Stock Exchange. The stock has lost 29 percent of its value since January.
“We do not believe the Street has rationalized the true impact of expected economic woes on consumer credit, and particularly what that means for JPM earnings,” analyst Guy Moszkowski wrote in a note to clients.
Moszkowski sees JPMorgan building reserves in a continually worsening credit environment driven by a climbing unemployment rate and cut his rating to “underperform” from “neutral.”
Several Wall Street analysts have cut their fourth-quarter profit view on JPMorgan citing significantly increased credit reserve builds and asset mark-to-market losses.
Analyst Moszkowski, who expects another $2.8 billion mark-to-market loss at the bank, reversed his fourth-quarter estimates to a loss of 11 cents a share from his prior view of 25 cents a share.
In the third quarter, the bank had reported net markdowns of $3.6 billion.
“While there is little doubt that JPMorgan will emerge from the current crisis in a good competitive position, it is increasingly clear that credit costs in the U.S. will get much worse, particularly in cards and commercial lending”, the analyst said.
On Dec. 11, JPMorgan Chief Executive Jamie Dimon had warned of a “terrible” fourth quarter, blaming mortgages, credit, and high yield bonds and loans.
Analysts polled by Reuters expect the company to earn 35 cents a share, excluding items, for the fourth quarter. (Reporting by Sweta Singh in Bangalore, Editing by Dinesh Nair)