JP Morgan got a deal
Bear Stearns issued an earnings report today that showed the company produced a $115 Million dollar profit in the first quarter of 2008. That amounts to annual earnings of $460 Million per year, while BSC is valued currently at $1.38 Billion. With that kind of earning potential, JP Morgan still has a lot of juice to squeeze out of its assets.
Even though net income for Bear Stearns had dropped 79% year over year, chances are that the company should settle at its current earnings. At this point it is unlikely that future income will continue to drop, as all the remaining payments are coming from solid investments. The fact that Bear turned a profit should be reason enough to think that JP Morgan got a great deal out of the debacle.
This further makes me believe that JP Morgan is also a great investment. The company has seemingly advanced without any impact from the subprime lending industry and now has even more risk free assets to back it up. I was a bit skeptical when JP Morgan first stepped up to the plate to buy Bear Stearns, but the Fed backing should be reason enough to know that JPM will be unlikely to take any loss from the takeover.
At any rate, JP Morgan looks like a great buy among an industry of lagging banks. When this is all said and done, it looks like JP Morgan will still be around with the few major players. A long term hold.