STOCK MARKET WATCH -- Friday, 13 January 2012

[Demeter]

52. JPMorgan May Report Record Profit

http://www.bloomberg.com/news/2012-01-12/jpmorgan-may-report-record-earnings-as-wells-fargo-closes-gap.html

JPMorgan Chase & Co. (JPM), likely to keep the title of most profitable U.S. bank when it reports earnings tomorrow, has a West Coast rival closing in: Wells Fargo & Co. (WFC)...JPMorgan is projected to report a record $18.5 billion in 2011 earnings when adjusted for one-time items, a 6 percent increase for the New York-based company, according to a survey of analysts by Bloomberg. Profit at San Francisco-based Wells Fargo is estimated to have jumped more than four times as much, to an all-time high of $15.3 billion.

By focusing on the U.S. and eschewing traditional Wall Street businesses such as structured products, Wells Fargo surpassed earnings at Goldman Sachs Group Inc. (GS) and Citigroup Inc. for six consecutive quarters. Wells Fargo, whose $1.3 trillion in assets make it the fourth-largest U.S. bank, also has higher valuations than its bigger peers....Wells Fargo “never really embraced investment banking as heavily as the Wall Street crowd has,” said Paul Miller, a former examiner for the Federal Reserve Bank of Philadelphia and analyst at FBR Capital Markets in Arlington, Virginia. “I think one of the reasons Wells is where they are right now is because they did not get into that business” in a bigger way, he said.
The strains on investment banking will be apparent in JPMorgan’s fourth-quarter profit, as well as weak trading results predicted for its smaller competitors when they report earnings next week, Miller said.

Earnings Ratio

Wells Fargo is being rewarded for its restraint with a market value of $156.2 billion, compared with $139.3 billion at JPMorgan and $91.4 billion at No. 3 Citigroup. (C) Only Goldman Sachs trades at a higher price-to-earnings ratio than Wells Fargo among the biggest U.S. lenders, at 10.76 versus 10.25. The higher the ratio, the faster investors think the company’s profit will grow.

“Traditional banking, predominantly making loans and taking deposits and serving both corporate and individual consumers, is being viewed more favorably right now by the investor community,” said Ed Najarian, who runs bank research at International Strategy and Investment Group in New York. “It’s considered safer and to have a steadier and more consistent earnings outlook.”