Unlikely Exit of Dimon Would Offer Buying Opportunity
At least one analyst on Wall Street says that a vote to split the roles of chairman and CEO at JP Morgan (NYSE:JPM) would offer a good buying opportunity for investors.
"If the stock was down 5% or more, I think JP Morgan stock would be very attractive to several market participants,” Matt Burnell, an analyst at Wells Fargo, told the FOX Business Network. Burnell said that Morgan’s expected return on equity, or the profit generated with the money shareholders have invested, “is visibly superior to its peers, and a 5% drop in its stock price would make it even more attractive in terms of valuation.”
Dimon has told people he might step down if stripped of the chairman's title. The conventional wisdom is that this would be bad for investors because the stock price would go down. Indeed, the shares are hitting 52-week highs after people inside JP Morgan said they believe Dimon will retain both roles.
But some analysts like Burnell see a buying opportunity because of the overall strength of the bank. Even in the worst case scenario -- that Dimon leaves -- it will not have an immediate impact on the company’s earnings.
JP Morgan cranked out a record $21 billion in earnings last year, and is expected to post strong numbers again.
“Jamie owns a lot of JP Morgan stock, so it’s in his best interest to do what benefits him financially,” said Burnell. That could mean the Wall Street titan demonstrates his loyalty and stays on long enough to create a seamless transition for the bank, rather than walking out right away.
Even with Dimon out, Burnell says the company will still perform, although a lot will depend on the economy as a whole. “The philosophies instilled into Dimon's chief lieutenants would not walk out the door with him (at least in the near term) so that should mean reasonable performance -- all else equal -- for JP Morgan's fundamentals.”
And if the vote is to strip Dimon of both titles, don’t expect to see a new chairman by the end of the week. “As far as I know, there is nothing that says they would need to split the roles immediately,” Burnell said. Dimon and JP Morgan could buy some time by arguing that they will need a period to develop a succession plan, or they could ignore the non-binding shareholder vote altogether, especially if it is particularly close.