Photo: Stanford Graduate School of Business
JP Morgan CEO Jamie Dimon spoke at the Deutsche Bank Global Financial Services Investor Conference todayWe followed the talk, expecting Dimon to comment on the bank’s recent $2 billion + trading loss and address other investor concerns.
A Citigroup research report this morning stated that this speech will give Dimon the opportunity to reveal more information about why the loss occurred, give a better explanation of the risk management measures in the bank’s CIO, and report on the bank’s progress in closing the trade.
As expected, Dimon did focus much of his speech on small, ambiguous updates on the CIO losses. But the biggest news from the talk was Dimon’s announcement that the bank would be suspending its $15 billion share repurchase program in order to meet Basel III requirements.
Here’s what happened, the posts are chronological order.
– The conference is starting, the presenter is speaking, introducing the audience, speakers and what issues may be addressed today. He says the first speaker, Jamie Dimon, “needs no introduction.”
– Dimon says he will take some questions on the CIO, and will give a small update. Dimon says the bank is making progress, and the issue will hopefully, by the end of the year, something people won’t talk about anymore. Dimon says he will NOT give updates on losses.
– JPM will suspend its previously announced share repurchase program. Dimon says people should not interpret comment as part of the trading loss, they’re stopping to raise capital for impending Basel III.
– Dimon clarifies that JPM intends to continue dividend.
– Dimon reaffirms JPM’s risk-averse business, says he hopes the CIO loss is an isolated event. The bank still has fortress balance sheet, which was barely “nicked,” Dimon says.
– Dimon is now taking questions from the audience.
– On compensation: We’re still going to need a high component of intellectual capital, in research, sales… etc. More than just technology, Dimon says.
– On Volcker: I don’t disagree with the Volcker rule, Dimon says, adding he’s been misstated. He says CIO portfolio was a hedge. Then goes on to talk about America’s wide and transparent capital markets and doesn’t want the rule to destroy that.
– Q: How much S&T revenue will be at risk because of Volcker? Dimon says he doesn’t know. Dimon says there are 400 rules coming out, and only have 100 clarified. One of the main issues with Volcker is that it may handicap ability to make markets in the U.S. for banks, and it’s hard for the company to compete overseas when business goes there because of Volcker, Dimon says.
– We have very few Treasuries in our portfolio, treasuries perform worst than most other things, Dimon says. But just because there are Treasuries in a portfolio doesn’t mean there’s risk.
– Q: What makes you confident that no one will talk about CIO trading blunder after end of year? Dimon says it’s because there’s great people managing it, and doesn’t go into much more detail. “You’ll know more later, not now,” he says.
– Dimon now answering a question about the effect of Eurozone effect. Greece leaving the Euro would create instability in the banking system, and be worse than default, Dimon says. He adds Eurozone problem is “boxed,” but doesn’t clarify, saying the issue is too volatile.
– More on repurchases: Dimon says it’s for Basel III. JPM will not make as much money after suspending repurchases. He adds that the bank needed to push down risk-weighted assets.
– Q: What is objective of CIO portfolio? Dimon replies CIO office is cash left over after loans, says every single bank has an office to do this.
– More on Eurozone: Dimon says he doesn’t think Eurozone will break up, they need the political and economic union. There’s no “ah-ha! moment” to solving the crisis, but the European Union needs to take sound, stable steps to address its fiscal issues; also needs more common social policy.