FBR Capital Markets reiterates outperform rating on JPMorgan
JPMorgan Chase (JPM) appears poised to grow its banking network and be an active participant in a modified mortgage market as a loan originator, servicer or securitization specialist, according to one investment banking firm. FBR Capital Markets (FBCM) said it's obvious JPMorgan is "in a position to aggressively take advantage of displacement among peers in the banking industry." The firm also reiterated its outperform rating on the company's stock with a price target of $53. JPMorgan hit a 52-week high of $48.36 in the middle of February. The stock last traded as high as $53 in early 2000. FBR said the banking giant expects the housing market to remain stagnant on a national level with opportunities for growth within specific regions of the country. The analysts said JPMorgan sees Florida and California as the best markets over the next few years, as REO sales as a percentage of sales in these states should decline. Meanwhile, other large metropolitan areas will see continued softening in their housing market. JPMorgan's portfolio of second-lien home equity lines of credit is holding up better expected, according to FBR, because borrowers often stay current on a second mortgage while trying to modify the first lien. And the bank actively manages credit lines instead of leaving the line open when the value of a property declines. Amherst Securities analysts said in February it appears many borrowers delinquent on their first mortgage stay current on the second to retain access to credit and liquidity. FBR said JPMorgan Chase plans to open 1,500 to 2,000 new branches to increase efforts to attract new consumer and small business banking opportunities. "We applaud the company for taking charge but remain skeptical whether it can effectively execute its ambitious plan and do not think it is important for the value of the stock in the short-medium term," FBR analysts said. The analysts said JPMorgan executives indicate little preference regarding potential reform facing Fannie Mae and Freddie Mac, saying the bank just wants a healthy mortgage market. "While this lackadaisical stance seems worrisome given the ramifications of some proposals out there, JPMorgan is well positioned to be an active participant in the modified market," according to FBR Capital Markets. Write to Jason Philyaw.