Outspoken CLSA bank analyst Mike Mayo slashed JP Morgan to underperform today from overperform, citing macroeconomic conditions that made him bearish on the stock, and the common belief that JPM may have peaked in the first quarter this year.He also continued to emphasise the fact that while the bank may be a star among the big conglomerates, its individual businesses are still laking.
Mayo gave three reasons why he downgraded the stock:
- The state of the American economy may continue to get worse rather than better, especially considering that the housing recovery may be hindered by a lack of government policies to encourage home buying and to deal with the continuing mortgage-debt problems.
- The slowing economy, further proved by the disappointing jobs numbers today, may also mean lack of loan growth for JPM. If the economy stalls, we believe that consumer loans (60% of JPM’s balance-sheet credit exposures) will continue to be a drag on JPMorgan’s performance, Mayo said.
- The state of the Eurozone continues to be unpredictable, now with social and political factors thrown into the mix with the upcoming French election. (Remember that JP Morgan has about $15 billion in exposure to the Eurozone, the largest out of all the U.S. large-cap banks).
JPM shares have fallen about 2.81% today along with other financial stocks, mainly due to the less-than-stellar jobs report from the morning.