(January 10 – 13:10 ET) – Merrill Lynch has name the newly-merged J.P. Morgan Chase & Co its top financial services stock pick for 2001, adding the firm to its Focus One list.

Merrill’s analyst Judah Kraushaar says, “The shares appear deeply undervalued when viewed as an emerging global securities play.” It says that JPM should benefit from the rate-cutting environment in the United States.

“We enthusiastically recommend JPM for four key reasons:

  1. controversy surrounding adverse operating leverage should fade;
  2. a successful merger integration should reveal JPM’s capacity to gain market share in high value businesses;
  3. recent reported earnings drags in the private equity business should turn positive in 2001; and
  4. we believe the shares reflect extraordinarily good value.”

Merrill expects JPM to realize US$800 million of the total expected merger savings of US$2 billion in 2001. For 2001, it forecasts 12% revenue growth and 5% expense growth. “The beauty of JPM’s strategy of leading with its global wholesale business is that league table data is readily available to monitor market share successes. JPM is in good position to show stable-to-improving market shares in key securities businesses such as equities/fixed income underwriting and M&A.”
-IE Staff