Higher earnings mask regulation risks

Article Excerpt

J.P. MORGAN CHASE & CO. $45 (New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 3.9 billion; Market cap: $175.5 billion; Price-to-sales ratio: 1.7; Dividend yield: 0.4%; TSINetwork Rating: Average; www.jpmorganchase.com) earned $15.8 billion in 2010. That’s up 79.7% from $8.8 billion in 2009. Earnings per share rose 75.3%, to $3.98 from $2.27, on more shares outstanding. That’s mainly because loan-loss provisions fell 48.0%, to $16.6 billion from $32.0 billion, as the economy recovers. However, revenue rose just 2.3%, to $102.7 billion from $100.4 billion, due to declines at its credit-card and retail banking operations. Morgan is also spending more to comply with new U.S. banking laws. The higher costs and uncertainty over the new laws will keep Morgan from raising its $0.20-a-share dividend. J.P. Morgan Chase is still a hold. hold…