Goldman adds JPMorgan to conviction buy list

by Fiona Gabriel | Tuesday, Jun 26, 2012 | 472 views

JPMorgan Chase & Co has been added to the American Conviction buy list of Goldman Sachs , in the view that the earnings power and the capital position of the US bank can offset the hedging losses of almost $2 billion that were suffered by the firm recently.

Morgan Stanley was downgraded from neutral to “buy” by Goldman Sachs and was removed from its conviction buy list stating that the muted capital markets activities could hurt its earnings. While the value in the shares of Morgan Stanley is being seen at depressed levels by Goldman, it is expecting much better results from JPMorgan.

JPMorgan had recently suffered a loss of 15 % in its share prices following a trading loss of almost $2 billion in its chief investment office, with the unit contributing almost 5 % to the average earnings per share.

In another statement, an analyst at Goldman said that JPMOrgan, which has currently halted the repurchase program worth $15 billion , will be resuming the buybacks later this year which might result in a support to the stock.

In a quick reflection to the trading loss at JPMorgan, the second quarter estimate for earnings was cut down by Goldman from 75 cents to 60 cents a share.

The price target on the share of Morgan Stanley was also cut down from $20 to $16 by the brokerage firm.

In the longer term, according to Goldman, Morgan Stanley and JPMorgan will be offering a meaningful return on equity.

While Morgan Stanley closed on $13.48, the shares of JPMorgan were trading at $35.32 on the New York Stock Exchange.

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