Analyst Brock Vandervliet says a Federal judge dismissed a fraud claim by JP Morgan against 11 insurers to recover nearly $1 billion in losses on trades between Mahonia & Enron. He notes the news, combined with the potential for credit ratings downgrades, is a significant setback for JP Morgan. Vandervliet expects full disclosure from the bank shortly on earnings per share implications tied to this issue.
Vandervliet notes JP Morgan has not established a reserve to cover this type of loss. Despite the lowest valuation in group, he sees no catalyst for the shares. He maintains his equal-weight rating.