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On Mar 4, 2013, we reiterated our long-term recommendation on JPMorgan Chase & Co. (JPM - Analyst Report) at Neutral. This reflects the company’s strong fourth-quarter results, which significantly surpassed the Zacks Consensus Estimate.

Why Neutral?

JPMorgan’s fourth-quarter earnings came in at $1.39 per share, significantly surpassing the Zacks Consensus Estimate of $1.20. Better-than-expected results were primarily driven by improved revenues and a slowdown in provision for credit losses, marginally offset by higher non-interest expenses.

Following the fourth-quarter results, the Zacks Consensus Estimate for 2013 has gone up 2.1% to $5.41 per share. Likewise, the Zacks Consensus Estimate for 2014 has also advanced (up 2.7% to $5.78 per share). With the Zacks Consensus Estimates for both 2013 and 2014 increasing, the company now has a Zacks Rank #3 (Hold).

The key reasons behind JPMorgan’s stable earnings in midst of the ongoing sluggish economic recovery is its business diversification. The spread of its portfolio may prove to be as much of a positive during the recovery as it was during the downturn. Also, JPMorgan will be able to leverage its strong deposit base when interest rates finally rise.

Yet JPMorgan’s top-line growth is expected to slow down in the next few quarters, owing to weak trading revenue and net interest margin contraction. Moreover, with the thrust of new banking regulations, there will be a pressure on fees and loan growth is likely to remain weak.

Other Major Banks Worth Considering

While we prefer JPMorgan, other major banks worth a look include BankUnited, Inc. (BKU - Analyst Report), Fifth Third Bancorp (FITB - Analyst Report) and State Street Corporation (STT - Analyst Report). While the first stock carry a Zacks Rank #1 (Strong Buy), other two retain a Zacks Rank #2 (Buy).

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