JP MORGAN Chase and Co suspended its daily stock repurchase program because the bank needs the money to meet international capital rules, not because of trading losses, chief executive Jamie Dimon said.
The quarterly dividend won’t change, Mr Dimon said during an investor conference yesterday where analysts peppered him with questions about how the New York-based firm’s chief investment office racked up at least $2 billion in losses since March 31st.
JP Morgan agreed with regulators to increase capital levels to “what we think our Basel III target will be”, Mr Dimon said, referring to international bank rules that require the largest global financial companies to maintain higher capital levels.
While Mr Dimon said he intends to restart buybacks, he won’t say when. “We want to box those things first,” he said.
JP Morgan, the biggest US bank by assets, is under pressure from investors and regulators to explain how the chief investment office, which is assigned to manage excess cash while minimising risk, made wrong-way bets on illiquid credit derivatives, some of them so large that they distorted market prices. While the loss may increase, the affair is an “isolated event” and the ensuing investigations aren’t likely to find any big surprises, Mr Dimon said.
“There’s no outcome that will be a disaster for this company,” Mr Dimon said. “I am not sitting here worried about the ultimate loss on this thing.”
JPMorgan dropped 1.8 per cent to $32.88 at 12.22pm in New York. The shares fell 18 per cent since the loss was disclosed on May 10th through last week. At that price, the shares are trading below tangible book value, which is the estimated value of the company if it had to be liquidated today.
“It is likely JPMorgan was told to stop buying back stock by its primary regulator, the Federal Reserve,” said Ed Najarian, head of bank research at International Strategy and Investment Group, an independent research firm in New York. “Based on Dimon’s previous comments, this is a price where he would like to be buying back the stock.”
Mr Dimon also told investors today that the losses won’t do any long-term damage to the company. – (Bloomberg)
