Chase CEO Jamie Dimon attends the 7th Choose France Summit aimed at attracting foreign investors held at the Palace of Versailles on the outskirts of Paris on May 13, 2024. I look at the situation.
Ludovic Marin | via Reuters
JPMorgan Chase & Co. executives said the bank would increase stock buybacks to keep its tens of billions of dollars in excess cash from growing.
Fresh off a year of record profits and profits, JPMorgan is facing questions over what Chief Financial Officer Jeremy Burnham acknowledged were “high-level issues.” By some estimates, the bank has about $35 billion in unmet funds. What regulators, or analysts, call “excess capital.”
“We’re hoping the excesses don’t escalate from here,” Burnham told analysts Wednesday. “Given the amount of organic capital we are generating, it means that unless we find organic expansion or other opportunities in the near term, we will see more capital returns through share buybacks. ”
The bank heard from investors and analysts who wanted to know what JPMorgan planned to do with the cash. The nation’s largest banks by assets have been saving profits in preparation for Basel 3 regulatory rules that will require more capital, but Wall Street analysts now believe the incoming Trump administration will adopt far more moderate policies. I think there is a high possibility that we will make a proposal.
Back in May, when this question came up at the bank’s annual investor day, CEO Jamie Dimon said the stock was trading near its then-52-week high of $205.88. He was furious at the idea of expanding his stock purchases.
“To be clear, we’re not going to buy back a ton of stock at this price,” Dimon said at the time.
Dimon said the company’s valuation was too high even for his company, saying, “It would be a mistake to buy back the stock of a financial company at significantly more than twice its tangible book value. That’s not what we intend to do.” said.
Since then, the bank’s stock price has only risen. The stock is now trading 22% higher than when Dimon made those comments.
JPMorgan has hinted at the risk of more difficult times ahead as it fends off calls to cut its cash pile any further than necessary. Dimon and others have been warning that a recession could be on the horizon since at least 2022, but the recession has not yet arrived and the end of the business cycle is still within sight.
Burnham returned to the topic Wednesday, telling reporters there is a “tension” between economic risks and high asset prices in the market. Banks therefore need to prepare for a “wide range of scenarios”, he said.
The sharp economic downturn will give the bank an opportunity to further leverage its estimated $35 billion in excess cash through loans, said Charles Peabody, an analyst at Portales Partners.
“JPMorgan will be disciplined to avoid angering capital,” Peabody said. “The best time to take market share is when we come out of a recession, because our competitors are doing more or less poorly, and despite pressure from shareholders to do more. We expect him to withdraw share buybacks from current levels.
