UPDATE: J.P. Morgan Raising Price Target On CapitalSource

J.P. Morgan Chase & Co. is out with a research report on CapitalSource CSE and is raising its price target to $8 from $7, but it is keeping its Neutral rating on shares. In a note to clients, J.P. Morgan Chase & Co. writes, "CSE reported EPS of $0.05 which beat our expectations as well as consensus of $0.01 and $0.03 respectively on a lower provision. More important than the earnings beat was management's decision to aggressively return capital to shareholders and postpone its bank charter application for 18 months. Overall, we view the shift in strategic direction as a positive for CSE shares over the longer-term, particularly given that with the new strategy not only is more capital preserved (via a more natural work through of NPAs), but also that management is focused on returning capital to shareholders. With the bank having plenty of excess capital and the constraint of the senior secured notes likely to be addressed in 2H11, on the call management emphasized that the return of capital to shareholders is likely to be a long-term process and that, although the company has plenty of excess capital, there is a somewhat of a liquidity constraint in terms of timing. Consequently, while the spigot is being opened to return capital to shareholders, which should provide a significant boost to normalized earnings power at the bank, the pace of capital deployment is likely to be measured. Maintain Neutral." Shares of CSE gained 24 cents on Friday to close at $6.46.