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Dick Bove: JP Morgan 'Probably Best Bank I Have Ever Followed in 5 Decades'

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Tuesday, 16 January 2018 02:43 PM

Banking guru Dick Bove described JPMorgan Chase & Co. "probably the best bank I have ever followed in five decades" of covering the industry.

JPMorgan beat Wall Street’s fourth-quarter earnings expectations late last week and said tax law changes will help future profits by not only reducing the amount it pays the federal government but also by stimulating more business.

"My view of this company is that it is probably the best bank I have ever followed in 5 decades of analyzing companies," CNBC said Bove told clients in a note.

JPMorgan, the biggest U.S. bank by assets, recorded $2.4 billion in one-time charges in the fourth quarter related to the tax law changes. However, it expects its effective tax rate to drop to 19 percent this year from 32 percent last year, which will save it billions of dollars.

The sweeping tax changes President Donald Trump signed into law in December, designed to kick-start economic growth, slashed the U.S. corporate rate to 21 percent from 35 percent.

As a result, JPMorgan said it expects corporations to borrow more, offer more stock and pursue more mergers and acquisitions, all of which would boost revenue, Reuters explained.

Although the bank plans to use some of that money for compensation, business investments, helping rural communities and other uses, it will mostly boost profits, executives said on a call with analysts.

“Much of it will fall to our bottom line in 2018 and beyond,” Chief Financial Officer Marianne Lake said on a call with analysts.

The bank’s shareholders should benefit as JPMorgan returns more capital to them through dividends and stock buybacks, she said.

Several financial companies, including Citigroup Inc (C.N) and Morgan Stanley (MS.N), have warned investors that they will face short-term pain over some of the tax changes. However, over the longer term, the changes are widely expected to generate gains for large U.S. corporations.

Some of the benefits will likely be lost as banks vie to offer better deals to customers, starting with businesses where prices change more quickly, Chief Executive Jamie Dimon said.

For his part, Bove is keeping his "buy" rating on JP Morgan as the stock already has gained more than 5 percent in the new year, CNBC.com explained.

"It appears that in 2018 the banking industry and JP Morgan Chase will enter a new financial world which will provide this company with further opportunities to grow," he told CNBC.

"In the new era, it is very possible that the valuation of JP Morgan and its industry will expand, a process that is already well underway."

(Newsmax wire services contributed to this report).

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Analyst Dick Bove calls JP Morgan 'probably the best bank I have ever followed in 5 decades'
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Tuesday, 16 January 2018 02:43 PM
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