Morgan Stanley Overweight On J.P. Morgan

Morgan Stanley is out with a research report on J.P. Morgan JPM after the bank reported earnings yesterday. It has an Overweight rating and a $60 price target. In a note to clients, Morgan Stanley writes, "Even if you don't want to look forward, JPM is generating 12% ROE today suggesting the stock should be at $54, or 1.2x $44.77 bvps. Stock at $40 basically says JPM can only generate an 8.9% ROE going forward. We're at 13% in 2013. ROE could rise to 15-16% if we model to basel 3 common tier 1 of 7.5% but we are instead sticking with our 10% CT1 estimate by end 2013, either way, JPM is a buy. 2Q's 4c beat on stronger top line (3% up q/q ex sec. gains) and better credit even as JPM absorbs 34c of “one-timers” for foreclosure and “mortgage matters”. As mortgage losses fade and share gain driven top line persists future ppop will expand. Stock outperformed BKX by 300 bp post earnings, notwithstanding Moody's decision to put USG on review for possible downgrade." Shares of JPM gained 73 cents yesterday to close at $40.35.