Can JP Morgan weather the near term?
lnp3 at panix.com
Tue Feb 12 08:12:11 MST 2002
NY Times, February 12, 2002
J. P. Morgan Seems to Feel the Ripples
By RIVA D. ATLAS
After a string of losses and bad publicity, J. P. Morgan Chase (news/quote)
finds itself on the defensive.
The company has large loans to Enron (news/quote), Kmart (news/quote) and
Global Crossing, all now in bankruptcy, and additional exposure in
Argentina. Its large portfolio of venture capital investments continues to
fall in value, though some of those losses are hedged, stock analysts said.
Noting that the bad loans account for just a small percentage of the
company's total loans, J. P. Morgan's executives have been reassuring
employees in recent weeks and telling investors that much of the market's
anxieties about the company are overblown.
"Yes, we had problems in 2001, and we are addressing them," William B.
Harrison Jr., J. P. Morgan Chase's chief executive, said in a Feb. 4
message to employees. "In the face of the publicity surrounding these
issues, though, it's very important to put them in the context of the
firm's overall performance."
Several Wall Street analysts have become convinced that the bank's shares,
down 12.4 percent this year, are relatively cheap. The stock, which closed
at $31.84 yesterday, is trading at just 10 times this year's expected
earnings, estimates Ruchi Madan, a stock analyst at Salomon Smith Barney,
who rates the company a buy.
Still, even the optimists say it is unlikely to rally until the economic
environment improves investment banking, lending and other services for
corporations, which combined represent roughly a majority of the bank's
"Once the economy recovers, things won't look so dire," said Steven
Wharton, an analyst for Loomis, Sayles & Company, which owns J. P. Morgan
shares. "The question is whether J. P. Morgan can weather the near term,
because obviously that will be difficult."
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