CEO of Chase, Jamie Dimon, was spotted attending the seventh “Choose France Summit” at the Chateau de Versailles just outside Paris on May 13, 2024, as part of an initiative to lure foreign investors to the country. Ludovic Marin captured this moment for Reuters.
The financial giants at JPMorgan Chase are strategizing to increase share buybacks to manage an ever-growing accumulation of extra cash, which currently amounts to several tens of billions. In a robust year that saw record-breaking profits and revenues, JPMorgan is grappling with what CFO Jeremy Barnum described as a “high-class problem.” The bank has about $35 billion more than it needs to meet regulatory demands, forming what industry analysts term “excess capital.”
Barnum shared with analysts on Wednesday, “We would prefer not to see this excess grow any further as our internal capital generation is quite strong. If we don’t find immediate opportunities for growth or alternative investments, more of this capital will be channeled into buybacks.”
Both investors and analysts are eager to know JPMorgan’s plans for this surplus cash. As America’s leading bank by assets, it has been setting aside revenue in anticipation of Basel 3’s impending regulatory norms, which appeared poised to enforce stricter capital requirements. However, with the political shift ushered in by the Trump administration, analysts predict a softer approach.
In May, at JPMorgan’s annual investor day, CEO Jamie Dimon expressed resistance to increasing purchases of its stock, even when it neared a peak at $205.88 per share.
He clarified, “I want to make it clear: we’re not going to aggressively buy back stocks at these prices. Our stock’s valuation is steep – buying a financial company’s stock at over double its tangible book value is imprudent. We won’t do it.”
Despite this stance, JPMorgan’s stock continues to climb, currently trading 22% higher than when Dimon made those comments.
As JPMorgan considers how to handle calls for reducing its cash reserve beyond necessary limits, it acknowledges the potential for challenging times ahead. Dimon and others have cautioned about possible recessions since 2022, though such downturns haven’t yet materialized, keeping the end of an economic cycle out of clear view.
Barnum told reporters on Wednesday that there exists a “tension” between economic risks and the elevated asset prices in the market. To that end, the bank is readying itself for multiple possible scenarios.
Analyst Charles Peabody from Portales Partners noted that during a severe economic slump, JPMorgan could leverage its $35 billion in surplus cash more effectively through lending.
“I believe JPMorgan will be prudent with its capital,” Peabody said. “The optimal time to expand market share is when exiting a recession, as competitors often struggle. Despite shareholder pressure for more buybacks, I anticipate they will scale back from current levels.”
