JPMorgan Chase & Co. is unlikely this year to resume share repurchases it suspended in May after disclosing multi-billion dollar losses from credit derivatives, two Wall Street analysts said after recent meetings with top executives of the bank.
Though CEO Jamie Dimon was still “hopeful” in a meeting about resuming buybacks in the final three months of this year, analyst Jeffery Harte of Sandler O’Neill Partners said in a report on Thursday that he is “less confident” regulators will allow repurchases before 2013.
JPMorgan has enough capital to safely buy back stock, Mr. Harte said. But he doubts that regulators will agree to repurchases as they approach the start of annual stress-testing and evaluations of bank balance sheets.
Earlier this week, analyst Matt O’Connor of Deutsche Bank said in a report that he left a meeting with Chief Financial Officer Doug Braunstein believing that regulators may make JPMorgan wait for the new stress tests. Mr. O’Connor called the chances of approval of buybacks late this year or early next year “unlikely”.
Mr. Dimon, after announcing that the derivatives losses were unlikely to get much worse than the $5.8-billion (U.S.) recorded so far, said JPMorgan would ask the Federal Reserve for approval to resume buying back shares in the fourth quarter, before the next stress test. Mr. Dimon contends the stock is cheap and that buying it back would add value to remaining shares.
The analysts talked to the executives after Mr. Dimon announced on Friday sweeping changes in responsibilities of his top lieutenants. Mr. Dimon called “totally ridiculous” speculation that the changes were a prelude to breaking up the company, said Mr. Harte. He had met with both Mr. Dimon and Matt Zames, who was named co-chief operating officer in the shakeup.
Some analysts have speculated that investors and regulators would push Mr. Dimon to split JPMorgan into a deposit-taking bank that makes loans to individuals and businesses and an investment bank that underwrites securities and trades freely in capital markets. The reorganization sets out two major business segments known as “Consumer and Community Banking” and “Corporate and Investment Bank.”
Mr. Dimon argued that any potential rise in stock price from breaking up the company would be temporary and followed by a loss of value to shareholders, Mr. Harte said.