JPMorgan Has Bigger Worry Than ‘London Whale’: Bove

JPMorganhas put its "London Whale" trading losses behind it, but the question now is how much money the bank can make from its regular operations, Dick Bove, Rochdale Securities bank analyst, told CNBC’s “Squawk Box” on Monday.

JP Morgan Chase headquarters
Bloomberg | Getty Images
JP Morgan Chase headquarters

The losses could get bigger, Bove said “but there’s a good chance that you may actually see a profit coming out of the residuals from this trade.” (Related: The World's Safest Banks).

According to Bove, “The core issue should be how much money can this company make from its operations. And I think in the second half of this year, it’s not going to make that much money.”

Bove said the underlying numbers at JPMorgan were not all that great in the second quarter.

The bank posted second-quarter net incomeof $4.96 billion, or $1.21 a share, compared with $5.43 billion, or $1.27 a share a year earlier.

The $4.4 billion trading loss after taxes reduced earnings per share by 69 cents in the quarter, the company said. JPMorgan said it cleaned up its Chief Investment Office, which made the disastrous credit bets, and that any problems were isolated to the group.

One trader in the Chief Investment Office, Bruno Iksil, took big enough positions in the credit derivatives markets to earn the nickname "The London Whale." Iksil has left the bank, a source said on Friday.

"We have put most of this problem behind us and we can now focus our full energy on what we do best," JPMorgan CEO Jamie Dimon said in a statement.

From here, Bove expects credit income to go down at JPMorgan. “It’s having trouble maintaining its non-interest income and its expenses are too high,” he added. “I think they’re about a buck a share a quarter for the next couple of quarters and that’s not terrific.”

Analyst disclosures: Dick Bove doesn’t own shares of JPMorgan and JPMorgan is not an investment banking client.


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