JPMorgan vs JPMorgan

Jamie Dimon losing out to JPMorgan analyst

In the battle to win the hearts and minds of shareholders, JPMorgan boss Jamie Dimon is currently losing to a member of his research team. The U.S. mega-bank on Friday reported first-quarter net income of $6.5 billion, a record. Yet, JPMorgan is still trading below book value. That lends weight to an argument by its own financial industry analyst that universal banks are "uninvestable."

Based on earnings alone, JPMorgan seems undervalued. With fewer extraneous one-off items and less socked away for expected losses on loans and legal costs, its first-quarter showing provides a clearer picture of what a well-run institution can earn these days. Its 13 percent annualised return on equity was just shy of what Wells Fargo reported on Friday. Pop JPMorgan on its West Coast rival's multiple of 1.3 times book value and it'd be worth 37 per cent more.

Other concerns linger, though. JPMorgan's Kian Abouhossein in a report this week warned investors to stay out of big bank stocks, based on the slew of new "uncoordinated regulatory proposals" in the pipeline. He argued they'll make it tougher for top-tier investment banks to earn enough money to justify the conglomerate structure.

It's not a view the big boss shares. Dimon sounded his common refrain that there's already enough regulation. "I hope at one point we declare victory and stop eating our young," he said. Despite continuing conversations and new proposals in Washington, there's no imminent threat to the bank supermarket model.

That won't be enough to comfort investors. JPMorgan is still grappling with the fallout of the London Whale trading fiasco. It's also one of only two banks that will have to resubmit its capital plans to the Federal Reserve following stress tests earlier this year.

Some of the numbers aren't exactly rosy either. JPMorgan's revenue slipped four per cent from a year ago compared to just one per cent at Wells Fargo. Net interest margins are thinning as the mortgage refinancing wave peters out. JPMorgan is only committing 60 per cent of deposits to lending, one of the lowest ratios in the industry. Dimon boasted on Friday of JPMorgan's number one ranking in many areas. If things keep going this way, though, he may need to reluctantly add his bank analyst to the list.