The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
JPMorgan Chase has made it painstakingly clear that the bank is better off with Jamie Dimon serving as both chief executive officer and chairman.
But the market seems to disagree ... which is one reason why the company's board might want to listen to the growing cries from some JPMorgan (JPM) investors to separate the two roles. The bank will have its annual shareholder meeting in Tampa in two weeks.
Shares are trading at a lower price-to-earnings ratio (based on 2013 profit forecasts) than its five biggest rivals: Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS) and Wells Fargo (WFC).
JPMorgan is also trading slightly below book value, the price that a company is theoretically worth if you subtract its liabilities from its assets. Book value is a key metric that many financial analysts look at when evaluating banks.
By way of comparison, the Financial Select Sector SPDR exchange traded fund (XLF), a collection of 83 banks, insurers and real estate companies, is trading at 1.2 times book value. Goldman Sachs and Wells Fargo both trade above book value as well.
And while JPMorgan's stock hasn't been a terrible performer per se -- it's up 10% year-to-date after all -- it has trailed the broader market and other bank stocks. That has to be disappointing, given that Wall Street banks operate in a world where you're only doing well if you are outperforming the competition.
The fact that JPMorgan is lagging instead of leading the bank pack is pretty shocking. In the immediate aftermath of the credit crisis, JPMorgan was thought to be the best of the financials. It traded at a premium to most of its peers.
The rationale was that the bank, despite receiving $25 billion in TARP funds, was in a much stronger position than the other financial giants who also got massive bailouts. It also took advantage of the downturn to get even bigger, scooping up investment bank Bear Stearns and savings and loan Washington Mutual on the cheap.
But JPMorgan is no longer being viewed as banking's star performer and the bloom is off of Jamie Dimon's rose as well.
The London Whale trading debacle, which led to a $6 billion loss, dented the bank's image ... if not its balance sheet. Recent allegations that the bank may have manipulated the power trading markets, which JPMorgan has denied, also have hurt the stock.
Even the Federal Reserve is taking a closer and more skeptical look at the bank. Earlier this year, the Fed merely granted conditional approval to JPMorgan's proposal to buy back stock and raise its dividend. The bank will have to resubmit its capital plan to the Fed later this year. (Goldman Sachs got a similar "yes, but" request from the Fed.) But 15 other banks, including Citi, BofA and Wells, received a green light from the Fed with no strings attached.
So what should JPMorgan do? Is there anything it can do? Shaking up the board might help. And naming a new chairman might convince some shareholders that JPMorgan is taking corporate governance issues more seriously.
But stripping Dimon of the chairman role (he's not going anywhere as CEO unless a dinosaur-sized skeleton is found lurking in the company's corporate closet) may not be a panacea either.
Of the other large banks, only BofA and Citi have split the chairman and CEO roles. Goldman, Morgan and Wells have all outperformed JPMorgan this year despite the fact that their CEO and chairman are the same person.
The problem may not be Dimon, but that JPMorgan has simply proven to be fallible. Investors got too used to the bank outshining its brethren and steering clear of the industry's worst sins.
"JPMorgan Chase is akin to an A student that is now getting B grades. The fallout from last year's London Whale loss seems to increase risk with management, reporting, consistency and brand," wrote CSLA analyst Mike Mayo in a recent report. "In short, we feel that other banks provide greater potential at this time."
Still, one institutional shareholder thinks JPMorgan Chase will get back in investors' good graces as long as the economy continues to improve.
John Snyder, manager of the John Hancock Sovereign Investors Fund (SOVIX), said the recent relative weakness of the stock is more about headline risk than anything truly broken with the company. Snyder noted that some investors may have also been disappointed to see that one of Dimon's top allies, co-chief operating officer Frank Bisignano, is leaving the bank to become the CEO of payment processing company First Data.
But Snyder, who also owns Wells Fargo, Goldman Sachs and Texas regional bank Cullen/Frost (CFR) in his fund, said it's now a great opportunity to buy JPMorgan given that it's a better bargain than its peers and also pays a dividend that yields 3.2%.
"There may be more uncertainty with JPMorgan Chase now but the stock is still cheap and you have to trust that Dimon will do what's right for shareholders," he said.
And by that, Snyder means he thinks Dimon will continue to boost the company's dividend and repurchase more stock ... assuming the Fed lets it, of course.
Whether or not Dimon falls on his sword and gives up the chairman title in the interest of shareholders remains to be seen ... but that seems like a long shot.
Another one of Jamie Dimon's key executives is leaving JPMorgan Chase, the firm announced Sunday.
Frank Bisignano, co-chief operating officer along with Matt Zames, is leaving the bank to run First Data Corp., a payments processing company owned by private equity firm KKR. Zames, who now appears to be the clear frontrunner to lead JPMorgan (JPM) when Dimon retires, will be the sole COO of the bank.
Related: What could cause the next MOREHibah Yousuf - Apr 28, 2013 4:15 PM ET
Current and former JPMorgan Chase executives, including ex-chief investment officer Ina Drew, are in Washington to testify about the bank's $6 billion London Whale losses before the Senate's Permanent Subcommittee on Investigations, led by Democrat Carl Levin and Republican John McCain.
Drew's testimony marks her first public comments on the bungled trades. Ex-head of market risk in JPMorgan's chief invesment office Peter Wieland and acting risk offer Ashely Bacon also testified.
Levin and McCain, who led a MOREHibah Yousuf - Mar 15, 2013 2:00 PM ET
In a sign of the seismic shifts on Wall Street, a 34-year veteran of JPMorgan Chase (JPM) jumped ship for BlueMountain Capital, one of the hedge funds that won big by betting against JPMorgan on its London Whale trades.
Jes Staley, who most recently served as the CEO of JPMorgan's investment division, said he's joining the hedge fund at a time of "sea changes in the financial services industry."
BlueMountain oversees MOREMaureen Farrell - Jan 8, 2013 2:11 PM ET
JPMorgan Chase (JPM) is restarting its plan to buy back its stock in yet another sign that the bank is shaking off troubles with regulators stemming from its London Whale trading loss.
In an SEC filing, the bank said it would buy back up to $3 billion of stock during the first quarter of 2013. The bank's initial plans -- to buy back up to $15 billion in stock, which MOREMaureen Farrell - Nov 8, 2012 6:11 PM ET
JPMorgan Chase (JPM) named Craig Delany, a 20-year veteran of the bank, as head of its chief investment office -- the unit that oversaw a $5.8 billion trading loss earlier this year. A spokesperson for the bank said the change was announced in an internal memo.
Delany's promotion comes as the bank continues to recover from its so-called London Whale trading losses and tries to refurbish its image as the best MOREMaureen Farrell - Sep 6, 2012 4:44 PM ET
The fun never ends with JPMorgan Chase (JPM). Shares fell nearly 4% Thursday following reports that the loss tied to its bad hedge (or is it a trade?) may now be $9 billion.
This should not come as a big surprise to anyone following the story. JPMorgan Chase CEO Jamie Dimon first said back in May that the loss was $2 billion. And not long after that, experts were claiming that MOREPaul R. La Monica - Jun 28, 2012 12:38 PM ET
Goldman Sachs (GS) told investors early Tuesday to buy JPMorgan Chase (JPM), and stop buying Morgan Stanley (MS).
JPMorgan Chase was upgraded to a so-called "conviction list buy," which, in Goldman Sachs' parlance, means run out and buy it. Conversely, Morgan Stanley was downgraded to a "hold" from a "buy."
Both banks have seen share prices fall precipitously this year, because of what Goldman's analysts say are "idiosyncratic events," including potential repercussions MOREMaureen Farrell - Jun 26, 2012 12:26 PM ET
JPMorgan Chase CEO Jamie Dimon returned to Capitol Hill, this time to get grilled by both Democrats and Republicans from the House Committee on Financial Services.
Before Dimon took the hot seat, lawmakers threw questions at several regulators including Securities and Exchange Commission chairman Mary Schapiro, U.S. Comptroller of the Currency Thomas Curry, Commodity Futures Trading Commission (CFTC) chairman Gary Gensler, FDIC acting chairman Martin Gruenberg and the Federal Reserve's general counsel Scott Alvarez.
The regulators effectively pointed fingers MOREHibah Yousuf - Jun 19, 2012 1:50 PM ET
JPMorgan Chase (JPM) was the top stock in the Dow Wednesday as investors cheered CEO Jamie Dimon's performance in front of the Senate. Then again, traders may not necessarily have been impressed by Dimon as much as they were disappointed by the lack of tough questioning from lawmakers.
andrezdanow: You have to love Congress: they have Dimon down to address $JPM risk failures, and then ask for his advice on rules, MOREPaul R. La Monica - Jun 13, 2012 2:13 PM ET
|Should Yahoo CEO Marissa Mayer be fired?|
|Fed ends 'too big to fail' lending to collapsing banks|
|Our sons' $189,000 student debt is delaying our retirement|
|China factory activity slumps to three-year low|
|Raspberry Pi's $5 computer sold out online in a day|