Wells Fargo Upgrades JPMorgan (JPM) to Outperform

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Wells Fargo upgrades JPMorgan (NYSE: JPM) from Market Perform to Outperform, largely on valuation. The firm note lower credit costs drive higher 2010E EPS, but margin and finreg challenges slightly reduce our 2011E EPS.

The firm upgrades for three reasons: "1) relatively cheap valuation to regional bank peers, 2) expected EPS support and TBV improvement from reserve releases, 3) potential for more aggressive capital management to boost returns, possibly by late 2010."

The firm raises estimates for Q3 2010 ($1.16 from $0.96) and Q4 2010 ($1.11 from $1.07) due to expectations of slightly higher reserve releases. 2010E EPS estimate rises 15% to $4.10 from $3.56. Lowering our 2011E EPS by 1%, to $5.35 from $5.40.

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