Jamie Dimon, CEO of JPMorgan Chase, testifies during a Senate Banking, Housing and Urban Affairs Committee hearing titled Annual Oversight of Wall Street Firms, at the Hart Building on December 6, 2023.
Tom Williams | Cq-roll Call, Inc. | Getty Images
Jamie Dimon believes shares C. B. Morgan Chase Expensive.
That was the message the bank's longtime CEO gave analysts Monday during JPMorgan's annual investor meeting. When pressed about the timing of a possible boost to the bank's stock buyback program, Dimon did not mince his words.
“I want to make this really clear, okay? We're not going to buy back a lot of shares at these prices,” Dimon said.
JPMorgan, the largest U.S. bank by assets, has seen its shares rise 40% over the past year, hitting a 52-week high of $205.88 on Monday before Dimon's comments weighed on the stock. This 12-month performance outperforms other banks, especially small caps recovering from the 2023 regional banking crisis.
It also makes the stock relatively expensive when measured by price to tangible book value, a commonly used industry metric. JPMorgan shares recently traded at about 2.4 times book value.
'mistake'
“Repurchasing shares of a financial company for substantially more than twice its tangible book value is a mistake,” Dimon said. “We won't do that.”
Dimon's comments about his company's stock, as well as an admission that he may be nearing retirement, sent the bank's shares down 4.5% on Monday.
To be clear, JPMorgan repurchased its shares under a previously approved repurchase plan. The bank resumed repo operations early last year after pausing capital building under expected new guidelines.
Dimon's directive simply means that the program is unlikely to be strengthened any time soon. JPMorgan is likely to buy shares for $2 billion to $2.5 billion on a quarterly basis, Portales Partners analyst Charles Peabody wrote in a March research note.
JPMorgan's chief executive has often resisted pressure from investors and analysts whom he views as short-sighted. When interest rates were low, Dimon held relatively high levels of cash, rather than pouring money into low-yield, long-term bonds. This has helped JPMorgan outperform other lenders, including… American bankWhen interest rates jumped higher.
Risks that are not estimated
Dimon's desire to hoard cash isn't just because of impending capital rules. On several occasions Monday, he said he was “cautiously pessimistic” about economic risks, including those related to inflation, interest rates, geopolitics and a reversal of the Federal Reserve's bond-buying programs.
Markets are not currently appreciating these risks, Dimon said. For example, Dimon said that high-quality corporate bond prices do not adequately reflect the potential for financial stress.
“The investment-grade credit spread, which is almost at an all-time low, would be completely wrong,” Dimon said. “It's only a matter of time.”
Since 2022, Dimon has warned of an economic “hurricane” caused by geopolitical risks and quantitative tightening. While the economy's continued strength surprised many on Wall Street, including Dimon, his concerns have influenced his decision-making ever since.
“We've been very consistent — if the stock goes up, we'll buy less,” he said Monday. “When it comes down we will buy more.”
