JPMorgan's Fundamental Pressure Continues - Analyst Blog

We issued an updated research report on JPMorgan Chase & Co. JPM on May 29, 2014. Management's lower guidance on market revenues makes us apprehensive about the bank's top-line growth.

Further, JPMorgan reported lower-than-expected first-quarter 2014 results. The banking colossus came out with earnings of $1.28 per share, missing the Zacks Consensus Estimate by 9.2%. Though prudent expense management was reflected in the non-interest expenses, pressure on top line and higher-than-expected provisions dominated.

Additionally, continued pressure on net interest margin remains a concern for JPMorgan. Given the persistent low rate environment, no significant improvement in interest yield is expected over the next several quarters.

Also, a stringent regulatory environment and slow client activity remain the major near-term concerns. Although JPMorgan has resolved quite a many litigation issues in the past one year, it still faces investigations from several federal agencies and a few foreign governments. So, we expect continuing elevated legal expenses in the near future.

Moreover, dismal first-quarter results and the subsequent events failed to gain investors and analysts' confidence on the stock. Hence, over the last 30 days, the analysts have been bearish on JPMorgan, leading to a decline in the Zacks Consensus Estimate. For 2014, the Zacks Consensus Estimate slipped 2.5% to $5.45 per share, while for 2015 it climbed down 1.5% to $6.09 per share.

JPMorgan presently has a Zacks Rank #4 (Sell).

Stocks That Warrant a Look

Some better-ranked major banks include The Bank of New York Mellon Corp. BK, KeyCorp. KEY and SunTrust Banks, Inc. STI. All these stocks carry a Zacks Rank #3 (Hold).