Jamie Dimon, CEO of JPMorgan Chase, testifies throughout the Senate Banking, Housing and City Affairs Committee listening to titled Annual Oversight of Wall Road Corporations, within the Hart Constructing on Dec. 6, 2023.
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Jamie Dimon thinks shares of JPMorgan Chase are costly.
That was the message the financial institution’s longtime CEO gave analysts Monday throughout JPMorgan’s annual investor assembly. When pressed concerning the timing of a possible enhance to the financial institution’s share repurchase program, Dimon didn’t mince phrases.
“I wish to make it actually clear, OK? We’re not going to purchase again plenty of inventory at these costs,” Dimon stated.
JPMorgan, the most important U.S. financial institution by property, has seen its shares surge 40% over the previous yr, reaching a 52-week excessive of $205.88 on Monday earlier than Dimon’s feedback dinged the inventory. That 12-month efficiency beats different banks, particularly smaller corporations recovering from the 2023 regional banking disaster.
It additionally makes the inventory comparatively expensive as measured by value to tangible guide worth, a generally used trade metric. JPMorgan shares traded lately for round 2.4 instances guide worth.
‘A mistake’
“Shopping for again inventory of a monetary firm drastically in extra of two instances tangible guide is a mistake,” Dimon stated. “We aren’t going to do it.”
Dimon’s feedback about his firm’s inventory, in addition to an acknowledgement that he could also be nearing retirement, despatched the financial institution’s shares down 4.5% Monday.
To be clear, JPMorgan has been repurchasing its inventory underneath a beforehand licensed buyback plan. The financial institution resumed buybacks early final yr after taking a pause to construct up capital underneath new anticipated tips.
Dimon’s steering merely means it’s unlikely this system might be boosted anytime quickly. JPMorgan is more likely to buy shares at a $2 billion to $2.5 billion quarterly clip, Portales Companions analyst Charles Peabody wrote in a March analysis notice.
The JPMorgan CEO has typically resisted stress from buyers and analysts that he deemed short-sighted. When rates of interest have been low, Dimon stored comparatively excessive ranges of money, relatively than plowing funds into low-yielding, long-term bonds. That helped JPMorgan outperform different lenders, together with Financial institution of America, when rates of interest jumped greater.
Underappreciated dangers
Dimon’s need to hoard money is not only due to impending capital guidelines. On a number of events Monday, he stated he was “cautiously pessimistic” about financial dangers, together with these tied to inflation, rates of interest, geopolitics and the reversal of the Federal Reserve’s bond-buying applications.
Markets are presently underappreciating these dangers, Dimon stated. For example, costs of high-quality company bonds don’t adequately mirror the potential for monetary stress, Dimon stated.
“The funding grade credit score unfold, which is sort of the bottom it is ever been, might be lifeless fallacious,” Dimon stated. “It is only a matter of time.”
Since 2022, Dimon has warned of an financial “hurricane” set off by geopolitical dangers and quantitative tightening. Whereas the continued power of the economic system has stunned many on Wall Road, together with Dimon, his issues have knowledgeable his decision-making course of ever since.
“We have been very, very constant — if the inventory goes up, we’ll purchase much less,” he stated Monday. “When it comes down, we’ll purchase extra.”