Says JPMorgan could resume share buybacks in 2012

* Cuts JPMorgan’s Q2 EPS estimates to $0.60 from $0.75

* Cuts Morgan Stanley’s 2012 EPS estimates to $0.56 from $1.04

* Sees muted capital markets activity hurting Morgan Stanley earnings

June 26 (Reuters) – Goldman Sachs added JPMorgan Chase & Co to its America’s conviction buy list, saying the U.S. bank’s capital position and earnings power can offset its recent hedging loss of at least $2 billion.

Goldman downgraded Morgan Stanley to “neutral” from “buy,” and removed the stock from its conviction buy list, saying earnings could be hurt by muted capital markets activity.

While Goldman sees value in Morgan Stanley’s shares at current depressed levels, it expects better returns at JPMorgan.

The 15 percent decline in JPMorgan share price since the largest U.S. lender by assets announced trading losses at its chief investment office has been “drastic,” given the unit’s 5 percent average earnings per share contribution, Goldman said.

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