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A man walks past JP Morgan Chase's international headquarters on Park Avenue in New York in this July 13, 2012, file photo. (ANDREW BURTON/REUTERS)
A man walks past JP Morgan Chase's international headquarters on Park Avenue in New York in this July 13, 2012, file photo. (ANDREW BURTON/REUTERS)

JPMorgan puts ‘London Whale’ in past Add to ...

A year ago, Jamie Dimon dismissed talk of a trading debacle at JPMorgan Chase & Co. with four unforgettable words: tempest in a teapot.

He was right about the tempest part. The ensuing uproar over the “London Whale” losses damaged his reputation as the savviest chief executive on Wall Street, forced him to fire senior managers and subjected his bank to unprecedented scrutiny.

It did not, however, have an impact on the bank’s ability to remain profitable – and that is why Mr. Dimon, 57, now appears set to ride out the worst storm of his tenure.

On Friday, JPMorgan announced that its profit for the first quarter was $6.5-billion (U.S.), a record figure and up 33 per cent from $4.9-billion the same period a year earlier, beating market expectations.

In an environment of sluggish economic growth and tighter regulation, the bank’s increased profit came from cutting expenses and lowering reserves against future losses, rather than from higher revenues.

Mr. Dimon’s capacity to manoeuvre through tough business terrain will be on the minds of shareholders as they approach the bank’s annual meeting next month.

There he faces a potentially humiliating rebuke: a shareholder vote on removing him from his role as chairman of the board, something proponents say is necessary to improve oversight of the sprawling institution.

Hailed for steering JPMorgan safely through the financial crisis, Mr. Dimon has taken numerous knocks over the past year.

The bank’s board cut his compensation for 2012 in half to reflect his responsibility for the trading fiasco, which cost the bank $6-billion after traders in London placed a huge and ill-fated bet in credit derivatives.

In March, a U.S. Senate report on the episode painted him as an executive who withheld information from regulators and presided over senior officials who ignored the growing risks of the esoteric trades.

“He has a black eye and it will take time to rebuild that credibility,” said Gerard Cassidy, a banking analyst at RBC Capital Markets. “Can he rebuild it? Absolutely. Has he lost all of it? Absolutely not.”

Mr. Dimon has continued to express contrition for the London Whale losses (most recently in an annual letter to shareholders on Thursday, in which he apologized for the affair and described it as “the stupidest and most embarrassing situation I’ve ever been a part of”).

It helps that he can point to a healthy bottom line. “In cases like this, the way you move on and the way you get investors back on board is just posting good solid results,” said Todd Hagerman, a banking analyst at brokerage firm Sterne Agee & Leach Inc.

A major test will be the shareholder vote in May. The bank is planning to send board members to meet with large investors to press their case for why Mr. Dimon should retain his dual role as chairman and chief executive, according to a recent report in The New York Times.

A spokesman for JPMorgan said it has been “our normal practice for years to connect major shareholders with our board members if the shareholders request it.”

On Friday, Mr. Dimon declined to address questions on what he would do if the shareholder proposal – which is non-binding – garners a majority of votes.

“You guys can ask me this question 15 times,” he said during a conference call. “I am not going to deal with hypotheticals right now.”

The shareholders pushing to strip Mr. Dimon of his chairman title say recent events have only underlined the need for better governance.

In particular, the Senate report described a “corporate culture of demeaning and belittling regulators,” said Lisa Lindsley of the AFSCME Employees Pension Plan, a large pension fund for federal, state and municipal employees, which is one of the investors behind the proposal.

Others agree that there is room for improvement on that score. Prior to the Whale episode, Mr. Dimon had emerged as an outspoken foe of new regulations for the financial sector. “Jamie had almost become an antagonist of the regulators,” said one former senior banker at JPMorgan, who asked not to be identified because he still works in the industry.

No longer. In his letter to shareholders on Thursday, Mr. Dimon wrote, “I feel terrible that we let our regulators down,” primarily in the London Whale episode but also on other fronts. “We want to be considered one of the best banks – across all measures – by our shareholders, our customers and our regulators.”

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