Jamie Dimon, CEO of Chase, attends the seventh “Choose France” summit, aimed at attracting foreign investors to the country, at the Palace of Versailles, outside Paris, on May 13, 2024.
Ludovic Marin | Via Reuters
JPMorgan Chase The bank will increase stock buybacks so that the growing pile of tens of billions of dollars in excess cash does not grow larger, executives said.
Fresh from A Record year As for earnings and revenue, JPMorgan faces questions about what a CFO is Jeremy Barnum It has been acknowledged as a “high-profile problem”: the bank, by some estimates, has nearly $35 billion of money it does not need to satisfy regulators, or what analysts call “excess capital.”
“We don't want to see excess growth from here,” Barnum told analysts on Wednesday. “Given the amount of organic capital generation we produce, this means that – unless we find in the near term opportunities to deploy organically or otherwise – it means more return of capital through buybacks.”
The bank has heard that from investors and analysts who want to know what JPMorgan intends to do with the cash. The largest US bank by assets has stored profits in preparation for Basel III regulations that would have required more capital, but Wall Street analysts now believe the incoming Trump administration is likely to propose something… Much nicer.
Back in May, when he asked this question at the bank's annual investor day, the CEO Jamie Damon He was troubled by the idea of increased purchases of his shares, which then traded near a 52-week high of $205.88.
“I want to do that really clear, Yes? “We're not going to buy back a lot of shares at those prices,” Dimon said at the time.
That's because the company's valuation was so rich, even in its own eyes, that “significantly repurchasing shares of a financial company at more than twice its tangible book value is a mistake. We wouldn't do that,” Dimon said.
The value of the bank's shares has only risen since then: the stock is now trading 22% more than it was when Dimon made the remarks.
In fending off calls to reduce its cash pile by more than it deems necessary, JPMorgan has hinted at danger Rocky times ahead. Since at least 2022, Dimon and others have warned of the possibility of a recession in the near future, but it has not arrived yet, leaving the end of the economic cycle in sight.
Barnum returned to the topic on Wednesday, telling reporters that there was a “tension” between risks in the economy and rising asset prices in the market; Therefore, the bank must prepare for a “wide range of scenarios,” he said.
A sharp economic downturn would give the bank the opportunity to deploy more of its estimated $35 billion in excess cash through loans, according to Portalis Partners analyst Charles Peabody.
“I think JPMorgan will be disciplined in not wasting capital,” Peabody said. “The best time to gain market share is coming out of a recession, because your competitors are fairly weak. I expect he will pull back on buybacks from current levels, despite pressure from shareholders to do more.”
