NEW YORK - With the financial crisis in the rear-view mirror, investors and analysts are turning their attention to JPMorgan Chase & Co's languishing stock price, setting the stage for a tough investors meeting on Tuesday for Chief Executive Jamie Dimon and his team.
At least one widely followed Wall Street analyst has raised questions about whether it makes sense for the largest US bank to be so big, pointing out that more narrowly focused financial institutions are fetching higher stock valuations for shareholders.
Dimon, who won wide acclaim for successfully managing JPMorgan through the worst of the financial crisis, will likely face difficult questions as he and his team give stock analysts and professional investors outlooks for the bank's six major operating units and the profit potential for the entire company.
Analysts are expected to press for plausible scenarios for profit growth because JPMorgan stock has lagged the broader stock market and trades at lower multiples of book value and earnings than shares of smaller competitors, such as Wells Fargo & Co, American Express Co, and money manager T. Rowe Price Group.
Although JPMorgan's shares have done better than other global banks, its stock traded on Monday at just pennies more than in 2004, when Dimon joined the company after it took over Bank One Corp where he was previously CEO. Over the same period, Standard & Poor's 500 stock index is up 22 per cent.
"In short, if JPM is best-of-breed and it still under performs, perhaps the breed is not so good," bank analyst Mike Mayo of CLSA said in a research note last week.
Mayo, author of the book "Exile on Wall Street: One Analyst's Fight to Save Big Banks from Themselves," said that at the least "the company needs to better explain the synergies whose benefits are missing from the share price."
JPMorgan is made up of the top-ranked investment bank by revenue, the third-largest consumer bank by deposits, and the number one credit card issuer by receivables, Mayo observed. It also is second in processing transactions, as well as a major money manager.
Biggest US bank
With US$2.27 trillion (S$2.86 trillion) in assets, last year it became the biggest bank based in the United States, surpassing Bank of America Corp, which has been shrinking to recover from problems with home mortgage loans.
But investors in the stock market apparently do not see compelling benefits of such scale and diversity of businesses.