JPMorgan Chase & Co has estimated its revenue could fall as much as $3 billion next year if, as a result of legislation, most of its derivative transactions are forced onto an exchange, Sanford C. Bernstein analysts wrote on Wednesday.
The bank could take an earnings hit of 13 cents to 20 cents per share in 2010 if proposed derivatives legislation becomes law, the analysts estimated after speaking Tuesday with Steve Black, executive chairman of JPMorgan's investment bank.
The calculations are based on the bank's estimate of a worst-case scenario that sees additional regulation for derivatives and the bulk of its privately traded derivatives contracts moving to an exchange.
Bernstein's current estimate for JPMorgan's 2010 earnings is $3.20 per share.
The second-largest US bank has reported record revenue from fixed income, commodities and currencies this year but believes such results will be difficult to repeat in 2010, the analysts wrote.
In addition, Black believes the fourth-quarter slowdown in trading volumes may be worse than usual this year as investors look to protect gains after a volatile year, the analysts, led by John McDonald, wrote.
Separately, JPMorgan is investing in emerging markets — particularly in Asia and Latin America — as well as its commodities and equities businesses to bolster earnings, according to the analysts.
JPMorgan shares fell as much as 1.75% to $41.48 in morning trading but recovered to $41.80 at midday, down 1%.
Comments