Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled Annual Oversight of Wall Street Firms, in the Hart Building on December 6, 2023.
Tom Williams | Cq-roll Call, Inc. | fake images
Jamie Dimon believes that the actions of JPMorgan Chase They are expensive.
That was the message the bank's veteran CEO gave analysts Monday during JPMorgan's annual investor meeting. When asked about the timing of a possible boost to the bank's share buyback program, Dimon didn't mince words.
“I want to make it very clear, okay? We're not going to buy back many shares at these prices,” Dimon said.
JPMorgan, the largest U.S. bank by assets, has seen its shares rise 40% over the past year, hitting a 52-week high of $205.88 on Monday before Dimon's comments hurt the stock. That 12-month performance outperforms other banks, especially smaller companies recovering from the 2023 regional banking crisis.
It also makes the stock relatively expensive, measured by price to tangible book value, a metric commonly used in the industry. JPMorgan shares recently traded at about 2.4 times book value.
'A mistake'
“Buying back shares of a financial company at more than twice the tangible book value is a mistake,” Dimon said. “We're not going to do it.”
Dimon's comments about his company's stock, as well as an acknowledgment that he may be nearing retirement, sent the bank's shares down 4.5% on Monday.
To be clear, JPMorgan has been buying back its shares under a pre-authorized repurchase plan. The bank resumed buybacks early last year after pausing to build capital under expected new guidelines.
Dimon's guidance simply means the program is unlikely to gain momentum anytime soon. JPMorgan is likely to buy shares at a rate of between $2 billion and $2.5 billion per quarter, Portales Partners analyst Charles Peabody wrote in a March research note.
JPMorgan's chief executive has often resisted pressure from investors and analysts he considered short-sighted. When interest rates were low, Dimon held relatively high levels of cash, rather than investing funds in long-term, low-yielding bonds. That helped JPMorgan outperform other lenders, including Bank of Americawhen interest rates rose further.
Underestimated risks
Dimon's desire to accumulate cash is not just due to the impending capital rules. On multiple occasions Monday, he said he was “cautiously pessimistic” about economic risks, including those linked to inflation, interest rates, geopolitics and the rollback of the Federal Reserve's bond-buying programs.
Markets are currently underestimating those risks, Dimon said. For example, prices of high-quality corporate bonds do not adequately reflect the potential for financial stress, Dimon said.
“The investment grade credit spread, which is almost the lowest it has ever been, will be completely wrong,” Dimon said. “It's just a matter of time.”
From 2022, Dimon warns of an economic “hurricane” caused by geopolitical risks and quantitative tightening. While the economy's continued strength has surprised many on Wall Street, including Dimon, his concerns have informed his decision-making process ever since.
“We've been very, very consistent: If stocks go up, we'll buy less,” he said Monday. “When it goes down, we will buy more.”
