J.P. Morgan Shares Up on Takeover Talk
J.P. Morgan Chase & Co.'s stock surged Monday on speculation that Bank One Corp. would buy the bank, which is struggling in a weak market. But analysts doubted the deal would happen.
“There is this takeover rumor on the stock,” analyst Reilly Tierney of Fox-Pitt, Kelton said. “I think it’s improbable.... Whoever buys J.P. Morgan is going to have to have a lot of capital to recapitalize [the firm], to address the balance-sheet issues that clearly hang over the stock.”
J.P. Morgan shares rose $1.30 to $20.27, and Bank One’s shares were up 20 cents to close at $39.08, both in New York Stock Exchange trading.
A J.P. Morgan spokeswoman declined to comment. A Bank One spokeswoman said it was against the bank’s policy to comment on rumors.
Chicago-based Bank One is smaller than J.P. Morgan, which is the No. 2 U.S. banking company by assets, but its market capitalization is larger, at about $45 billion. J.P. Morgan Chase’s market capitalization is about $40 billion, after concerns about unpaid corporate loans and its involvement with collapsed energy trader Enron Corp. drove its stock down more than 40% this year. (Market cap is figured by multiplying a company’s stock price by the number of its outstanding shares.)
Bank One Chief Executive James Dimon has expressed an interest in expanding credit card, money management, retail and possibly investment banking units. But analysts said J.P. Morgan Chase’s loans would be too risky for Bank One, which has been reducing its corporate lending.
J.P. Morgan is wrestling with weak stock trading results and losses on soured loans to telecommunications and cable companies. Its third-quarter profit fell 91% to $40 million, or a penny a share, and it said it would cut about 2,200 additional jobs following previous staff reductions.
“Whenever a company is as challenged as J.P. Morgan is right now with respect to its financial performance, that’s when stories like this surface,” said Brock Vandervliet, an analyst at Lehman Bros. “So from that perspective, it’s not surprising.”
Bank One has fared better in the slow economy and stock market slump. It posted a 9% rise in third-quarter profit to $823 million, or 70 cents a share, helped by higher balances in its vast credit card business, deposit growth and cost controls.