JPMorgan Chase & Co may post a third-quarter loss given the more challenging credit and capital markets environment as well as the $2 billion reserve addition related to its acquisition of Washington Mutual Inc's banking operations, according to an analyst at Credit Suisse.
Analyst Susan Katzke forecast a third-quarter loss of 25 cents a share for JPMorgan, and cut her 2008 profit view for the US bank to $1.65 a share from $2.50.
On Thursday, JPMorgan said it bought the banking assets of Washington Mutual for $1.9 billion, after US authorities closed the largest US savings and loan bank, which has seen its stock price virtually wiped out because of massive amounts of bad mortgages.
JPMorgan said it expects to incur $1.5 billion of pre-tax costs, but realize an equal amount of annual savings, mostly by the end of 2010. It expects the transaction to add to earnings immediately, and increase earnings 70 cents per share by 2011.
“We are confident in the achievability of forecast acquisition-related cost savings; we are less confident in the cost of the current credit and capital markets cycle to the bank's existing operations,” Katzke wrote in a note to clients.
The analyst, however, maintained her “outperform” rating on the stock, and said she expects JPMorgan to fundamentally outperform peers based on the strength and stability in its senior management, balance sheet strength and competitive positioning.
“We continue to recommend purchase of JPMorgan as a core financial services holding,” she added.
Katzke set a new price target of $55 from a prior range of $50 to $55.
Shares of the company closed at $43.46 Thursday on the New York Stock Exchange. (Reuters)