JPMorgan Chase steps up buybacks after Dimon called shares expensive

JPMorgan Chase Executives said the bank would step up share buybacks to stop its growing pile of tens of billions of dollars in excess money.

JPMorgan just had a record 12 months for profits and revenue and is faced with the query of who the CFO is Jeremy Barnum Admittedly, it was a “high-profile issue”: The bank is estimated to have about $35 billion in funds it doesn't must satisfy regulators, or what analysts call “excess capital.”

“We want the surplus to stop growing from here,” Barnum told analysts on Wednesday. “Given the amount of organic capital we produce, unless we find opportunities for organic deployment or other opportunities in the near term, that means a higher return on capital through buybacks.”

The bank has heard it from investors and analysts who need to know what JPMorgan plans to do with the cash. The largest American bank by assets has been piling up profits to arrange for Basel 3 regulations that will have required more capital. But Wall Street analysts say the brand new Trump administration is prone to propose something far softer.

When the difficulty got here up at his bank's annual investor day in May, CEO Jamie Dimon bristled at the concept of ​​expanding purchases of his shares, which were then trading near a 52-week high of $205.88.

“I want to be very clear, okay? We will not be buying back many shares at these prices,” Dimon said on the time.

This is since the valuation of the corporate is simply too high even in his own eyes, said Dimon: “Repurchasing shares in a financial company that are well over twice the material inventory is a mistake. We won’t do that.”

The bank's stock has only increased since then: One share now trades for 22% greater than when Dimon made those comments.

JPMorgan pushed back against calls to scale back its money holdings greater than it deemed essential, suggesting the danger of tougher times ahead. Dimon and others have been warning about the potential for an imminent recession since not less than 2022, but it surely hasn't happened yet, so the tip of an economic cycle continues to be in sight.

Barnum returned to the subject on Wednesday, telling reporters that there was a “tension” between risks within the economy and high asset prices out there; The bank subsequently has to arrange for “many scenarios,” he said.

Charles Peabody, an analyst at Portales Partners, said a pointy economic downturn would give the bank the chance to deploy more of its estimated $35 billion in excess money through loans.

“I think JPMorgan will be disciplined and not waste capital,” Peabody said. “The best time to gain market share is at the end of a recession when your competitors are somewhat weakened. And I expect he will scale back his buybacks from current levels, despite pressure from shareholders to do more.”