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JPMorgan Chase & Co
Annual investor meetings usually begin with management recapping a company’s financial and operational state. At this morning’s JPMorgan Chase (JPM) annual meeting in Tampa, Chief Executive Officer Jamie Dimon wasted no time before addressing the elephant in the room. “I want to start with what is probably on your mind,” Dimon said, launching into brief remarks about the bank’s $2 billion loss on a derivatives bet gone awry.
Calling the bet “poorly vetted and poorly executed,” as he has done for days, Dimon said the bank had many lessons to learn from it. He praised Ina Drew, a 30-year staff veteran who ran the chief investment office until announcing her retirement on May 14. He said a change in management was necessary in light of the office’s loss and added that the bank has appointed an executive to work full-time on investigating the lapse. Then Dimon tried to get back to regular business, reading a statement about the highlights of JPMorgan’s different business units. “Each of our businesses are among the best in the world,” he told shareholders, saying the bank will be stronger and more profitable in the future.
The loss continued to charge the meeting. Several investors who presented shareholder proposals mentioned it. When a clergy member representing the Board of Pensions of the Presbyterian Church submitted a proposal to improve the bank’s mortgage servicing, he said the loss from the derivatives trade “pales in comparison” to the losses shareholders and homeowners suffered from faulty mortgage servicing. He said the bank failed to help struggling borrowers stay in their homes and created unfair foreclosures. Others cited the big loss in contending that JPMorgan’s board should be more independent; they said Dimon should not serve as both chairman and CEO and that JPMorgan should limit its political lobbying and donations.
The trading setback came up repeatedly during the Q&A portion of the meeting. Citing Dimon’s assurances that the bank could handle a $2 billion loss, one shareholder asked why the bank wasn’t devoting that kind of money to reducing the principal on troubled mortgages. Touching on a topic dear to investors’ hearts, a shareholder from Kentucky asked if the loss would cause Chase to cut its dividend. “I certainly hope not,” Dimon replied. “The company is strong, sound, profitable.”
Another shareholder suggested that the derivatives losses present an opportunity for the bank to drop its anti-reform crusade and instead support meaningful financial regulations. “You are lobbying against a strong and meaningful Volker Rule and a strong Consumer Financial Protection Bureau,” the investor said. “It’s a benefit for Chase to really have rules that will create a level playing field.”
In the middle of the Q&A session, which lasted about half an hour, a Tampa shareholder gave Dimon a vote of confidence. “We think you are doing a fabulous job,” he said. The audience responded with tepid applause.