JPMorgan to Buy Rest of Cazenove - Analyst Blog

JPMorgan Chase & Company (JPM) is in discussions to take full control of its U.K. joint-venture partner, Cazenove Group, for about £1 billion ($1.7 billion).

JPMorgan entered into a partnership with Cazenove five years ago. At that time, JPMorgan paid about £100 million for a 50% ownership in Cazenove.

Now, JPMorgan intends to buy the remaining 50% of the investment-banking partnership for 500−525 pence per share.

Chief Executive Naguib Kheraj, the former finance chief of Barclays PLC (BCS) is running JPMorgan Cazenove since last year. Cazenove first became one of London’s leading stockbrokers in the mid-1930s.

Deciding on the full acquisition of Cazenove has been crucial for Jamie Dimon, CEO of JPMorgan. Dimon organized a similar purchase of the bank’s remaining stake in Highbridge Capital Management this year.

In the last few years, JPMorgan has been able to maintain its top position in global investment banking. The company also emerged from the financial crisis stronger than many of its peers such as Bank of America Corporation (BAC), Wells Fargo & Company (WFC) and US Bancorp (USB).

We think that JPMorgan is in a relatively good shape from a capital perspective. We expect the company’s capital position to be a major differentiator going forward vis-à-vis its peers as it implies lower risk of additional capital raises and more opportunity for market share gains. Also, in the second quarter of 2009, the company repaid the entire $25 billion in preferred capital received as part of the Troubled Asset Relief Program (TARP).

We anticipate continued synergies from the company’s diversification and strong capital position, but increasing provisions and worsening credit quality will be a drag on upcoming results.