Bove: Financial Reform Spells Trouble For JP Morgan

Dick Bove may have proffered his love for Citi this morning (giving us a break from the BofA one), but he has his doubts as to the future of JP Morgan.

And people say we’re contrarian!

Bove says that JP is one of the banks most at risk if the government’s financial regulatory overhaul plans go through.

While not being as bearish as he is regarding Wells Fargo, he says that it is not even out of the question that “portions of the firm would have to be sold or spun off.”

Bove argues that since the government wants more say in how banks use capital and doesn’t want less of it locked up in “illiquid proprietary investing, trading, or other long dated assets or privately insured investments,” it might force JP Morgan to shrink its assets at risk to increase its liquidity.

“This means lower margins and quite probably lower growth in revenues,” Bove says.

In addition, the bank has still has too much in assets at risk in businesses that are not traditional banking and since the government wants a separation of traditional banking and the use of bank capital in trading and proprietary, that will further hurt it.  

Finally, he says that as the bank ranks in the top three nationwide in every major consumer finance product credit cards, mortgages, and home equity loans, pricing parameters and higher regulatory costs will definitely harm these businesses. 


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