JP Morgan ‘the best bank I have ever followed’

“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 said. “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.”

Banks are being seen as big beneficiaries of the tax cuts Congress enacted in December.

In its earnings presentation, JP Morgan said its effective tax rate would be 19 percent, compared to 35 percent prior. That in itself should provide the bank a nice cushion, even though it had to take a $2.4 billion charge for 2017 because of the tax legislation.

In his note to clients, Bove reiterated his view that Q4 numbers were “not impressive.” However, he still holds a positive outlook due to the bank’s ability to negotiate a number of obstacles.

“Whether investors look at reported numbers (as I do) or managed numbers, quarter-over-quarter, revenues were down and expenses were up,” he wrote. “Admittedly, one-time events impacted the numbers but the biggest impact was in the tax adjustment not the operating numbers.”

While other banks stocks have underperformed, JP Morgan’s return of about 60 percent over the past two years has about doubled the S&P 500.

“An assessment of JPMorgan Chase in recent years indicates that this management has been wrestling with a hostile environment and yet it has been able to maintain its stability,” Bove said. “The stock price is indicating that this environment is about to change meaningfully in a very favorable direction.”

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