J.P.Morgan Chase & Co. Credit Improvement Playing Out; Most Bullish Price Target of $61 +28% $JPM

Investment Thesis
•We are Overweight JPM given its earlycapital markets and card businesses and stronger risk management relative topeers and strong capital levels.
•Accretion from the WM acquisition driveshigher earnings growth going forward.
•Expect JPM’s stronger balance sheet willenable it to take share.

Key Value Drivers
•Card – Declining early stagedelinquencies should lead to modestreserve release and losses peaking inearly 2010
•Retail - Declining early stagedelinquencies should lead to lowerreserve build and losses peaking in early 2010
• Investment Bank - Taking share withinvestment spending in IT and fill-ins(Sempra) and as clients access its strongbalance sheet.
• TSS- Benefiting from volatility in capitalmarkets

Potential Catalysts
• Card NCO decline
• Continued reserve release
• Improving market share gains in capitalmarkets activities
• Efficiency improvements in higher marginconsumer loans

J.P.Morgan Chase _ Co.