UPDATE 1-Fox-Pitt sees ‘08 loss provision of $16 bln at JPMorgan
July 1st, 2008 | by admin |(Adds details, analysts’ estimates, share movement)
July 1 (Reuters) - Fox-Pitt Kelton analyst David Troneforecast about $16 billion in provision for credit losses forJPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz) in 2008 and cut his rating on thestock to “in line” from “outperform.”
“We see the ABS-CDO/subprime debacle yielding to a moregeneral weak credit cycle, and impending problems in consumerand corporate are likely to hurt JP Morgan,” said Trone, whoalso cut his 2008 and 2009 earnings view on the third-largestU.S. bank.
The analyst said he expects the bank’s Tier 1 ratio — ameasure of financial strength based on capital availableagainst perceived risk — to fall to 7.2 percent by thefourth-quarter of 2009.
Trone forecast second-quarter earnings of 32 cents a sharefor JP Morgan and said he expects a deterioration in creditquality of commercial loans due to continued economic slowdown.
Analysts on average expect the bank to earn 57 cents ashare, before exceptional items, for the second-quarter,according to Reuters estimates.
He, however, said the bank represented an attractivecollection of strong franchises for the longer-term, providedit can escape the pending credit downturn without too muchdamage.
Trone cut his 2008 earnings estimates on the stock to $2.25a share from $2.90 and 2009 estimates to $3.29 a share from$4.00. He also cut his price target by $5 to $45.
Shares of JP Morgan were trading at $34.32, up more than apercent in morning trade on the New York Stock Exchange. (Reporting by Ramya Dilip in Bangalore; Editing by JarshadKakkrakandy)
