The Great Debate UK

from Breakingviews:

Jamie Dimon needs an even better post-crisis

Jamie Dimon needs an even better post-crisis. The JPMorgan boss runs one of the only major U.S. banks not to post a quarterly loss during the crash. And he has maneuvered his firm into a strong position to grow as the economy rebounds. But investors don't yet seem persuaded.

The shares have been stuck trading around book value, or assets less liabilities, since last summer. Put in perspective, that's not all bad. They had tumbled to less than half that in the depths of the crisis. But to price the bank now at only a fraction more than break-up value seems overly cautious. Another crisis outperformer, Wells Fargo, by comparison, trades at 1.4 times book.

The two lenders are more equal using another measure. Investors value Wells at 14.8 times this year's expected earnings, and JPMorgan at a multiple of 13.9. This still means, however, that Dimon's bank is getting no credit for a faster growth rate. Analysts reckon its net income should jump by a third this year compared with just 8 percent at Wells. Moreover, by 2011 JPMorgan could be earning twice what it did in 2009, and Wells 65 percent more.

At first glance, JPMorgan looks unfairly penalized. After all, both banks are heavily exposed to U.S. consumer loans. JPMorgan expects its credit card unit will lose as much as $2 billion in the first half of this year and that quarterly losses on its mortgage loans may be still higher than last year. Both banks also will lose income from legislation limiting credit card and overdraft charges -- perhaps as much as $1.25 billion for JPMorgan. And Dimon still sees a chance of a double-dip recession.