Jamie Dimon, CEO of JPMorgan Chase, testifies at the Senate Banking, Housing and Urban Affairs Committee hearing on “Annual Oversight of Wall Street Firms” at the Hart Building on December 6, 2023.
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Jamie Dimon believes stocks JP Morgan Chase expensive.
That’s the message the bank’s longtime CEO gave to analysts Monday during JPMorgan’s annual investor meeting. When asked about the timing of a potential increase in the bank’s share repurchase program, Dimon did not mince words.
“I want to be clear, okay? We’re not going to buy back a lot of shares at these prices,” Dimon said.
Shares of JPMorgan, the largest U.S. bank by assets, have risen 40% over the past year, hitting a 52-week high of $205.88 on Monday before Dimon’s comments weighed on the stock. These 12-month results outperform other banks, particularly smaller firms recovering from the 2023 regional banking crisis.
It also makes the stock relatively expensive when measured relative to tangible book value, a widely used industry metric. JPMorgan shares recently traded at about 2.4 times book value.
‘Error’
“Repurchasing shares of a financial company for significantly more than twice its book value is a mistake,” Dimon said. “We’re not going to do that.”
Dimon’s comments about his company’s stock, as well as an acknowledgment that he may be close to retirement, sent the bank’s shares down 4.5% on Monday.
To be clear, JPMorgan is repurchasing its shares in accordance with its previously approved repurchase plan. The bank resumed buybacks early last year after I take a break increase capital in accordance with new expected benchmarks.
Dimon’s instructions simply mean that it is unlikely that the program will be expanded anytime soon. JPMorgan will likely buy shares at between $2 billion and $2.5 billion on a quarterly basis, Portales Partners analyst Charles Peabody wrote in a March note.
JPMorgan’s CEO often resisted pressure from investors and analysts, which he considered short-sighted. When interest rates were low, Dimon maintained a relatively high level of cash rather than investing in low-yielding, long-term bonds. This has helped JPMorgan outperform other lenders, including Bank of Americawhen interest rates jumped higher.
Underestimated risks
Dimon’s desire to hoard money isn’t just about looming capital regulations. He said repeatedly Monday that he was “cautiously pessimistic” about economic risks, including those related to inflation, interest rates, geopolitics and the end of the Federal Reserve’s bond-buying programs.
Markets are currently underestimating these risks, Dimon said. For example, prices for high-quality corporate bonds do not adequately reflect the potential for financial stress, Dimon said.
“An investment grade credit spread that is near the lowest it has ever been would be completely wrong,” Dimon said. “It is the matter of time.”
Since 2022, Dimon has been warning of an economic “hurricane” driven by geopolitical risks and quantitative tightening. While the economy’s continued strength surprised many on Wall Street, including Dimon, his concerns have been influencing decision-making ever since.
“We’ve been very, very consistent – if the stock goes up, we’ll buy less,” he said Monday. “When it gets to the end, we’ll buy more.”