JPMorgan to Suspend Stock Buybacks

BY NELSON D. SCHWARTZ

12:01 p.m. | Updated 
Two months after announcing a $15 billion share buyback program, JPMorgan Chase reversed course on Monday, saying it was halting the repurchases in the wake of the bank’s multibillion-dollar trading loss.

Jamie Dimon, the bank’s chief executive, disclosed the move at a meeting with investors sponsored byDeutsche Bank in Manhattan. The buybacks had been set to run through the end of the first quarter of 2013.

Mr. Dimon said the bank intended to keep its dividend of 30 cents a quarter unchanged. Bank officials have repeatedly emphasized that the company has no plans to reduce it, despite the trading loss. Initially estimated by the bank at $2 billion, the trading loss on credit derivatives now stands at more than $3 billion, according to traders and regulators.

Mr. Dimon did not provide an update estimate of the size of the losses, but he said the bank was making progress in unwinding the disastrous credit bets.

“We are going to wrestle the problem down,” he said.

JPMorgan, the largest bank in the United States by assets, announced the share repurchase plan and a dividend increase in March, immediately after receiving permission from the Federal Reserve. The Fed subjected JPMorgan and 18 other large financial institutions to a third round of stress tests early this year, tests that JPMorgan had passed with flying colors.

While JPMorgan’s balance sheet was “barely nicked” by the trading loss, Mr. Dimon said on Monday, the bank is suspending the repurchases temporarily as part of a “prudent” approach to capital retention. The move also grow out of a desire to stay on track in meeting higher capital requirements under the Basel III regulatory accords.

After the March announcement, JPMorgan’s stock surged, eventually rising to more than $40 a share. The shares have fallen sharply since the announcement of the surprise loss, however, and were at $33 in midday trading on Monday, down .49 cents.

Besides being the most embarrassing misstep of Mr. Dimon’s seven-year tenure at the top of JPMorgan, the trading loss has also strengthened the hand of regulators and politicians who favor tighter rules on how the big banks operate. In his radio address on Saturday, President Obama urged tighter restrictions on banks’ trading activity.

The buyback suspension is the first policy change as a result of the trading loss. The bank has already accepted the resignation of Ina Drew, the executive who headed the chief investment office, which was responsible for the loss, and more departures are expected.

The bank’s overall health remains strong, and JPMorgan Chase is still expected to post a profit for the second quarter. The appearance by Mr. Dimon at the Deutsche Bank conference was his latest in a campaign of contrition; he has offered apologies everywhere from NBC’s ‘Meet the Press” last Sunday to the annual shareholder meeting in Tampa, Fla., last week.

“We try do everything by the book,” he said, after being asked why the bank went public so quickly with news of the trading blowup, beginning with a hastily arranged conference call hosted by Mr. Dimon with analysts on May 10. “You’re allowed to be wrong,” he added. “But to be that wrong, that quickly, we felt terrible.”

NYT