It’s not what Jamie Dimon might call just water off a whale’s back.
Dimon’s JPMorgan Chase is facing a raft of fines and legal settlements that will put a significant dent in the bank’s future earnings, according to outspoken analyst Dick Bove.
Shareholders may be underestimating the effect, Bove said.
“The impression I am getting from what I read, and Friday’s stock price movement, is that investors are shrugging off the recent actions by the United States government against JPMorgan Chase,” Bove said in a research note to clients on Monday.
“If this in fact is the case, it is a big mistake,” he wrote.
JPMorgan shares are up 17 percent this year. They closed Monday down 2.5 percent, to $51.46.
Bove estimates that Dimon’s big bank, which agreed to shell out $1 billion in fines last week alone tied to its “London whale” trading scandal and a separate matter on credit cards, will shell out $5.8 billion annually in penalties over the next few years.
Indeed, pending settlements with the Commodity Futures Trading Commission could see JPMorgan pay out hundreds of millions more in whale-related settlements.
Lingering mortgage-related fines from state and federal governments also are dogging Dimon’s bank.
Reports on Monday maintained that California might file a civil lawsuit against the bank tied to toxic mortgage securities it originated in 2005 and 2007.
A bank spokesman declined to comment on any possible lawsuits.
Although Bove doesn’t provide specific estimates for the impact on the fines on JPMorgan’s operating results, the analyst said he would likely adjust his earnings outlook for the firm.
Bove currently has a “neutral” rating on JPMorgan’s shares, with a 2014 price target of $57.