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JPMorgan shares rose 1.6 percent this week, valuing the bank at $184.9 billion through yesterday. That eclipsed the $184.2 billion for Wells Fargo & Co., which slipped to No. 2 on Feb. 5 after being the most valuable since Oct. 28, 2011, according to data compiled by Bloomberg.
The recovery shows JPMorgan Chief Executive Officer Jamie Dimon has blunted fallout from last year's trading loss, which wiped out as much as $51 billion in shareholder value. Wells Fargo, led by CEO John Stumpf, 59, has seen the rise of its shares slow amid investor concerns that weaker mortgage lending and shrinking margins will crimp profit.
"Capital-market firms like JPMorgan have been burdened quite heavily by the financial debacle, more so than regional or national banks like Wells Fargo," said Gerard Cassidy, an analyst at RBC Capital Markets. "As they continue to throw the baggage overboard, all of these legacy issues that have been hampering profit are going away. Owning the riskier names is more attractive today in this economy."
Investors should bypass regional lenders for universal banks such as New York-based JPMorgan because the larger firms have lower price-to-earnings and price-to-book ratios and the Federal Reserve's bond purchases will encourage trading and hurt lending spreads, David Konrad, a KBW Inc. analyst, said in his 2013 outlook.
JPMorgan has gained 11 percent this year, outpacing Wells Fargo's 2.3 percent advance and the 7.3 percent climb for the 24-company KBW Bank Index. JPMorgan trades at 0.95 times book value, a measure of assets minus liabilities, compared with 1.27 for San Francisco-based Wells Fargo.
"If you are less worried about risk you will start to bid up these shares, which are trading at below book," said Jennifer Thompson, an analyst at Portales Partners LLC. "That's where you will focus in terms of relative upside."
JPMorgan lost more than $6.2 billion in the first nine months of last year from trades on credit derivatives made at its chief investment office in London. The trader who amassed the position came to be known as the London Whale because the bets were big enough to move the market.
Source: Bloomberg | Dakin Campbell & Dawn Kopecki