Comment & Analysis

DEUTSCHE BANK CUTS ESTIMATES, TARGET FOR JP MORGAN

Deutsche Bank (Xetra: 514000 - news) analyst Mike Mayo says that worsening economic trends should put additional pressure on JPMorgan Chase & Co.'s (JPM) loan portfolios [especially cards, home equity, residential, and commercial mortgage] as well as banking industry in general.

Mayo expects commercial bank loan losses to rise from 1.5% to 3% by the end of 2010, on increased percentage of loans with higher losses, greater consumer leverage and sooner problem recognition by banks.

He cuts 2009 EPS estimate by $0.65 to $2.05, and 2010 by $0.35 to $2.20, reflecting higher loss rates and lower revenue. As a result, he cuts $37 target to $34. He rates JPM hold.

WACHOVIA UPGRADES ALTERA, VIEW ON SEMICONDUCTOR INDUSTRY

Wachovia (NYSE: WB - news) analyst David Wong says he's hopeful that a turn in the semiconductor market is only a few months away.

Wong says inventory levels are likely to rise at the end of fourth quarter 2008, and again at the end of first quarter 2009. But he's hopeful that recent aggressive action to control inventory in the electronic supply chain has paved the way for improvement in inventory levels, perhaps starting in the second quarter 2009.

He says year-over-year sales could begin to improve in second quarter 2009, and show year-over-year growth by October. He raises the sector to overweight from market weight and Altera (ALTR) to outperform from market perform.

MORGAN KEEGAN DOWNGRADES SYNOVUS FINANCIAL

Morgan Keegan analyst Robert Patten says he cuts Synovus Financial (NYSE: SNV - news) (SNV) to market perform from outperform after management forecast fourth quarter net chargeoffs to jump to 3.2% of average loans vs. 1.55% in the third quarer, and forecast fourth quarter provision charges of $350 million vs. $151 million, which was worse than he had expected.

While little details were provided, Patten expects losses to be driven by residential loan portfolio. Also, he expects the commercial real estate portfolio to come under increased stress given the impact of the ongoing recession.

He cuts $0.45 2009 EPS estimate to $0.07 loss.