JPMorgan Chase CEO and Chairman Jamie Dimon gestures as he speaks during the U.S. Senate Committee on Banking, Housing and Urban Affairs’ hearing on oversight of Wall Street firms on Capitol Hill in Washington, DC
Evelyn Hockstein | Reuters
JPMorgan Chase said late Wednesday that the Federal Reserve overestimated a key earnings indicator in the giant bank’s latest stress test and that its losses in the review should actually be larger than the regulator found.
The bank took the unusual step of issuing a press release minutes before midnight ET revealing its reaction to the Fed’s findings.
JPMorgan said the Fed’s forecasts for a measure called “Other Comprehensive Income,” which represents income, expenses and losses excluded from net income, “appear too high.”
According to the Fed’s table of projected earnings, revenue and losses through 2026, JPMorgan was allocated $13 billion in OCI, more than any of the 31 lenders in this year’s test. It was also estimated that the bank would suffer about $107 billion in loan, investment and trading losses in this scenario.
“If the company’s analysis is correct, the resulting stress losses would be slightly higher than those disclosed by the Federal Reserve,” the bank said.
The error means JPMorgan may need more time to finalize its share buyback plan, according to a person familiar with the situation who did not want to be identified because of the regulatory process. Banks were expected to begin disclosing those plans after the market close on Friday.
The news contradicts the Federal Reserve’s announcement on Wednesday that all 31 banks in the annual exercise had cleared the hurdle of being able to withstand a severe hypothetical recession while maintaining adequate capital levels and the ability to lend to consumers and businesses .
Last year, Bank of America And Citigroup made similar statements, saying their own future earnings estimates differed from the Fed’s findings.
Banks have complained that aspects of the annual audit are opaque and it is difficult to understand how the Fed arrives at some of its findings.
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2024-06-27 14:34:23
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