Probes piling up for JPMorgan
The banking giant is getting battered from all sides by investigations. But while the stock is down in August, investors are still way ahead this year.
The banking giant faces continuing scrutiny and criminal investigations over that $6 billion "London Whale" trading loss in 2012. Two executives involved in that mess now face charges that they understated the losses the bank faced.
The Securities & Exchange Commission is looking into whether JPMorgan's hiring of the children of prominent Chinese officials helped the banking giant win more business in China. It's not clear, however, that hiring the children of any high-ranking official anywhere is illegal.
The company also faces a probe over alleged manipulation of electricity markets. It has already agreed to pay $410 million to settle allegations by the Federal Energy Regulatory Commission that the bank manipulated markets in California and the Midwest.Oh, and some folks in South Carolina are mad. The bank is shutting down a Florence, S.C., office that handled mortgage renegotiations and refinancings. In January, the office employed 1,300. The bank's explanation: Mortgage problems are declining, and there isn't enough work for the office.
In all, The Wall Street Journal noted, JPMorgan Chase is the subject to at least seven probes right now. Whether all the probes will result in charges, fines or whatever is unclear. Often, a probe starts with some noise and ends quietly.
Bad publicity is probably the norm for any big bank, especially since the 2008 financial crisis. Many of them have deserved it, including JPMorgan. The London trading loss was embarrassing for its size and for the incompetent management of its operation. Even CEO Jamie Dimon (pictured above) conceded the point.
But the piling up of scrutiny all at once is unwelcome for JPMorgan, an organization that prides itself as one of the best-managed financial companies in the world. The bad press threatens to slowly strip away that veneer of brilliance. Whether it results in anything really big is questionable. Analyst Dick Bove told CNBC Tuesday he believes the ultimate goal of all these probes ultimately is to break the company up.
All that said, the stock may be down for reasons entirely divorced from all these probes. Stocks aren't having a good month. Interest rates are rising, and stocks are sensitive to interest-rate swings.
The Dow Jones Industrial Average ($INDU) is having its worst month since May 2012, although the loss so far is a modest 3.2%. The 2% pullback for the Standard & Poor's 500 Index ($INX) is potentially its biggest monthly decline since October.
Financial stocks are up just 0.6% for the month, fifth worst among the sectors of the S&P 500.
Despite JPMorgan's decline this month, company is big, with $2.4 trillion in assets and still very profitable. Second-quarter net income was up 31% from a year ago. Earnings for the year should be up 14.2% from a year ago. Revenue for 2013 may hit $100 billion for the first time.
The shares are still up nearly 19% on the year, better than the gains for the Dow and the S&P 500. The shares are up nearly 69% since the bottom after the London Whale debacle was first announced.
And yet, they may be a bargain. The relative strength index for the stock is at 32; a reading at 30 or lower suggests the stock is oversold. On Tuesday, the shares moved up 50 cents to $52.30. In the process, the stock bounced off the trend line that had been in place since June 2012.
Plus, the shares are selling at 8.7 times trailing earnings and 8.4 times forward earnings. Hardly pricey.
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In my opinion, anyone who owns JPM stock is just as guilty as the company itself. If you are profiting on their stock shame on you. They are all crooks and their profits are like stolen money which makes you just as guilty. I just wish they had let them fail in 08. We would be better off today.
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