Am I crazy? My first thought after reading that JPMorganChase
Well, as it turns out, it is 45.5% of trailing annual net income and 6.5% of trailing annual revenue. That's big.
A more appropriate first response would have been, "Why settle?" It can't be because Citigroup
It almost seemed that JPMorgan Chase settled because everyone else was. Last week Deutsche Bank
So, what's the big deal? Hey, it's just $2 billion, right? Try this logic: We'll go forward under the assumption that the fees JPMorgan Chase earned for selling $5 billion in WorldCom bonds was a fraction of the $2 billion settlement -- and those fees were before taxes, too. Now it is paying $2 billion in after-tax income to settle this case. That's a big hit.
To me it is staggering to think of a company with 160,000 employees toiling away, day after day, and earning $4.4 billion in 2004, only to pay 45% of that as a settlement.
Most investors will look at analyst estimates that JPMorgan Chase will earn $3.48 in 2006 and see the stock trading at an affordable 10 times forward earnings. And that's after a 14% decline over the past year. Is that a fair price? Well, if this is truly a one-time event, probably so, and bullish investors may be looking at a potential buying opportunity. For investors who worry that this tomfoolery may portend related monsters lurking in JP's closet, then the stock might not be down enough.