JPMorgan Chase CEO Jamie Dimon testifies during the Senate Banking, Housing and Urban Affairs Committee hearing entitled “Annual Oversight of Wall Street Firms,” December 6, 2023, in the Hart Building.
Tom Williams | Cq-roll Call, Inc. | Getty Images
Jamie Dimon thinks about stocks JPMorgan Chase are expensive.
That was the message the bank’s longtime CEO gave analysts Monday during JPMorgan’s annual investor meeting. When Dimon was asked about the timing of a possible expansion of the bank’s share buyback program, he didn’t mince his words.
“I want to be very clear, okay? We’re not going to buy back a lot of 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 weighed on the stock. This 12-month performance outperforms other banks, particularly smaller companies, recovering from the 2023 regional banking crisis.
This also makes the stock relatively expensive, measured in terms of price relative to tangible book value, a key figure commonly used in the industry. JPMorgan shares recently traded at around 2.4 times book value.
‘A mistake’
“Repurchasing shares of a financial company that are worth significantly more than two times tangible stock is a mistake,” Dimon said. “We won’t do it.”
Dimon’s comments about his company’s stock, as well as an admission that he may be nearing retirement, sent the bank’s shares down 4.5% on Monday.
To be clear, JPMorgan repurchased its shares under a previously approved repurchase plan. The bank resumed buybacks early last year after taking a pause to build capital in line with new expected guidelines.
Dimon’s hints simply mean that the program is unlikely to be strengthened any time soon. JPMorgan is expected to buy shares at a quarterly price of $2 billion to $2.5 billion, Charles Peabody, an analyst at Portales Partners, wrote in a March research note.
JPMorgan’s CEO has often resisted pressure from investors and analysts that he considered short-sighted. When interest rates were low, Dimon kept relatively large amounts of cash instead of investing funds in low-interest, long-term bonds. That has helped JPMorgan outperform other lenders, including Bank of Americaas interest rates skyrocketed.
Underestimated risks
Dimon’s desire to hoard cash isn’t just due to upcoming capital rules. On Monday, he said repeatedly that he was “cautiously pessimistic” about economic risks, including those related to inflation, interest rates, geopolitics and the reversal of the Federal Reserve’s bond-buying programs.
The markets are currently underestimating these risks, said Dimon. For example, high-quality corporate bond prices do not adequately reflect the potential for financial stress, Dimon said.
“The investment-grade credit spread, which is almost at an all-time low, will be absolutely wrong,” Dimon said. “It’s only a matter of time.”
Since 2022, Dimon has warned of an economic “hurricane” triggered by geopolitical risks and quantitative tightening. While the economy’s continued strength surprised many on Wall Street, including Dimon, his concerns have since influenced his decision-making process.
“We have been very, very consistent – when the stock goes up, we buy less,” he said on Monday. “If it goes down, we will buy more.”
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2024-05-20 20:44:19
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