JPMorgan Chase boosts buybacks after Dimon shares fall

JPMorgan Chase Officials said the bank would increase share buybacks to prevent excess cash, estimated at $10 billion, from growing any further.

Fresh off a record year for profits and earnings, JPMorgan is facing questions about what CFO is up to. Jeremy Barnum He admitted it was a “high-level 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 don’t want the profit to grow from here,” Barnum told analysts Wednesday. “Given the amount of organic capital generation that we’re generating — unless we find opportunities for organic deployment in the near term or otherwise — that means more capital return in return.”

The bank has heard from investors and analysts who want to know what JPMorgan intends to do with the cash. The largest U.S. bank by assets has stockpiled earnings in preparation for Basel III regulatory rules that require more capital, but Wall Street analysts believe the incoming Trump administration could offer something more lenient.

In May, when the question was raised at the bank’s annual investor day, CEO Jamie Dimon spoke on the idea of ​​expanding stock buybacks, which were trading at a 52-week high of $205.88.

“I want to be really clear, okay? We’re not buying a lot of stock at these prices,” Dimon said at the time.

That’s because the company’s valuation is so rich that, even in his own view, Dimon said, “It’s a mistake to buy a financial company’s stock at more than double the value. We don’t do it.”

The bank’s stock has only appreciated since then: a share is now 22% higher than when Dimon made those comments.

Fending off calls to dilute its cash pile more than it deems necessary, JPMorgan signaled concern about rocky times ahead. At least as early as 2022, Dimon and others have warned that a recession is imminent, but it has yet to come, leaving the end of the economic cycle on the horizon.

Barnum returned to the topic on Wednesday, telling reporters that there was a “tension” between the risks in the economy and the high value of assets in the market; So the bank had to prepare for “broad conditions”.

A major recession would give the bank an opportunity to deploy more than $35 billion in loans, said Charles Peabody, an analyst at Portales Partners.

“I think JPMorgan is being punished for not provoking capital,” Peabody said. “The best time to take market share is coming recession, because your competitors are somewhat weakened. And despite pressure from shareholders to do more, I expect a return to buying from current levels.”