JPMorgan Chase increases buyout after Dimon calls shares expensive

JPMorgan Chase executives said the bank would increase share buybacks to keep tens of billions of dollars of excess cash from growing further.

Fresh a record year for profit and revenue, JPMorgan faces questions about what the CFO Jeremy Barnum This was a “high class problem”: the bank has, by some estimates, about $35 billion in cash it doesn’t need to satisfy regulators, or what analysts call “excess capital.”

“We would like to see surpluses not grow from here,” Barnum told analysts on Wednesday. “Given the amount of organic capital that we’re generating, that means that — unless we find opportunities to deploy organically or otherwise in the near term — that means more capital returns through buybacks.”

The bank heard it from investors and analysts who want to know what JPMorgan intends to do with the cash. The largest U.S. bank by assets has been hoarding profits as it prepares for Basel 3 regulations that would require more capital, but now Wall Street analysts believe the incoming Trump administration is likely to offer something much softer.

Back in May, when this question came up at his bank’s annual investor day, the CEO Jamie Dimon bristled at the idea of ​​increasing purchases of its shares, which were then trading near a 52-week high of $205.88.

“I want to make it.” really clear ok? We are not going to buy back many shares at these prices,” Dimon said at the time.

That’s because the company’s valuation was too high, even in its own eyes, Dimon said: “The buyback of a financial company’s stock that is well over twice its tangible balance sheet is a mistake. We’re not going to do that.”

Since then, the bank’s shares have only appreciated, with the stock now trading 22% higher than when Dimon made the remarks.

While fending off calls to cut its cash pile more than it thinks necessary, JPMorgan hinted at the risk rocker times ahead. Since at least 2022, Dimon and others have warned of the possibility of a recession, but it has yet to materialize, leaving the end of the economic cycle still on the horizon.

Barnum returned to the theme on Wednesday, telling reporters that there is a “tension” between risks in the economy and high asset prices in the market; The bank therefore had to prepare for a “wide range of scenarios”, he said.

According to Portales Partners analyst Charles Peabody, the sharp economic downturn will give the bank an opportunity to use its estimated $35 billion in excess cash through loans.

“I think JPMorgan is going to be disciplined about not ripping off capital,” Peabody said. “The best time to take market share is coming out of a recession, because your competitors are deteriorating to some degree. And I expect it to pull back from the buyout from current levels, despite pressure from shareholders to do more.” .