Noted: JPM and “Merger Mondays” to come

November 10, 2009

Richard Bove at Rochdale says JPMorgan is in pole position to benefit from a surge in dealmaking:

“A core theme in our banking thesis is that “Merger Monday” is back.

“There could be a surge in merger and acquisition (M&A) activity that may last two to three years. The dollar is weakening, the yield on junk bonds has plummeted, and the stock market is quite strong. The money is available. No company is better positioned to take advantage of this development than J.P. Morgan.”

Bove says JPM has tens of thousands of middle-market clients as well as long-standing relationships with the biggest U.S. companies, such as Mars and Black and Decker.

“In the third quarter, revenues from advisory activity were $384 million. I would expect the quarterly revenue from this source to reach $600 million by yearend 2010 and $800 million quarterly by yearend 2011. If this assumption proves to be correct, the advisory business could add $0.15 per share to 2010 earnings per share and another $0.13 per share to 2011.”

Not only that, he says but the bank can also rake in fees lending to buyers, divesting businesses, and helping newly wealthy sellers invest their proceeds.

Bove’s JP-focused bullishness chimes with wider M&A optimism in recent notes from Deutsche, UBS and SocGen.

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