UPDATE: MKM Partners Starts JPMorgan (JPM), Citigroup (C), & Bank of America (BAC) at Buy

(Updated - May 21, 2014 11:19 AM EDT)

MKM Partners initiated coverage on JPMorgan (NYSE: JPM) with a Buy rating and a price target of $65.00. Citigroup, Inc. (NYSE: C) and Bank of America Corp. (NYSE: BAC) were also initiated at Buy with price targets of $56 and $18, respectively.

Analyst David Trone outlined an number of potential outcomes for banks including Super-Bull, Normal Bull, Hold, Normal-Bear, and Super-Bear. In his view, Normal-Bull is the most likely.

"Normal-Bull-Case (45% chance over the next 12 months). The normal-bull-case is that universal bank stocks can improve somewhat due to a combination of modest book growth and hopes of ROE expansion. We believe the latter is possible through key capital efficiency measures or an acceleration of global economic growth. We believe this scenario could generate 20% gains," said Trone.

"We project about 20% upside potential as follows: (a) Bank of America, our target is $18; (b) Citigroup, our target is $56; and (c) JP Morgan, our target is $65. As seen in the Value Ratio Analysis chart, our price targets imply P/Bs, which at a Value Ratio of 1.0, would require ROE expansions (from 6.8% to 8.2% at Bank of America, from 7.6% to 7.8% at Citigroup, and from 9.6% to 11.3% at JP Morgan). These gains may be a function of simple cyclical improvement, while bigger moves could result from bigger returns of excess capital, but beyond that, we see ROEs capped in the low-teens forever. This could then lead managements to capitulate and break up the universal banks," he added.

For an analyst ratings summary and ratings history on JPMorgan click here. For more ratings news on JPMorgan click here.

Shares of JPMorgan closed at $53.72 yesterday.

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