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JPMorgan being hurt by 'outrageous' attacks: Bove

Tuesday, 24 Sep 2013 | 10:51 AM ET
Adam Jeffery | CNBC

Regulators chasing after JPMorgan Chase are damaging the bank and anyone who doesn't think so is making "a big mistake," analyst Dick Bove said.

The largest U.S. financial institution by deposits has been under relentless fire this year after it lost more than $6 billion on the so-called London Whale trading losses.

Since then, the bank has been hit by fines and lawsuits that Bove, the vice president of equity research at Rafferty Capital Markets, expects to cost the firm, when including the Whale losses, upwards of $8 billion in each of the next few years.

Bove's analysis runs counter to the consensus, which believes the bank is strong enough to overcome its multiple brushes with regulators.

JPM will pay $920 million settlement
JPMorgan will pay 3 regulators in the U.S. and UK $920 million to settle its "London Whale" charges; and in other news, the Post Office is getting dangerously low on cash. CNBC's Josh Lipton reports.

(Read more: Teflon Jamie: Anyonecare about JPMorgan's woes?)

But things didn't get any better for the firm Tuesday, following reports that settlement talks have broken down with the Justice Department regarding mortgage securities the bank sold prior to the financial crisis.

(Read more: A bad day for Jamie Dimon just got a lot worse)

In light of all the difficulties, Bove expects the bank to change its operating procedures in some ways that already have been documented.

For instance, JPMorgan is no longer involved in proprietary trading and recently said it is exiting the student loan business as well. The company also faces pressure from the Consumer Financial Protection Bureau not to raise prices and fees.

(Read more: Next up forJPMorgan: A fight with the CFTC)

Taken together, Bove said there's no way the company won't be harmed.

"I lack the knowledge to ferret out all of the ways that this company's business operations will be changed but make no mistake they are being changed," he said in a note to clients. "This will impact the secular growth of the company."

Normally strongly bullish on banks, Bove has a neutral rating with a hold recommendation on JPMorgan.

Despite its difficulties, the firm's shares are up 22 percent over the past year and nearly 1 percent over the past month, a period during which its peers on the KBW Bank Index have fallen nearly 8 percent.

Nevertheless, Bove said shareholders should be aware of trouble ahead.

"This company's operating results will be negatively impacted by the government's attack on the company," he said. "The cost could be $5.8 billion in after tax earnings or 25 percent of projected 2013 results."

(Read more: TARP didn't savebanks, it ruined them: Kovacevich)

Shareholders will be the ultimate victims, he said.

"What the United States government is doing to this company is outrageously incorrect and unfair," Bove said. "It lacks even the simplest concepts of equity and honesty. Moreover, the actions of the government are dangerous to its citizens and the standing of U.S. banks in the global financial system."

_ By CNBC's Jeff Cox. Follow him @JeffCoxCNBCcom on Twitter.

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