Bloomberg News

JPMorgan’s Investment Bank Revenue ‘Flat,’ Chief Dimon Says

December 13, 2011

(Updates with additional repurchase capacity in the penultimate paragraph.)

Dec. 7 (Bloomberg) -- JPMorgan Chase & Co., the biggest U.S. lender by assets, will have “essentially flat” investment bank revenue this quarter excluding accounting adjustments, according to Chief Executive Officer Jamie Dimon.

The comparison is to this year’s third quarter, said Jennifer Zuccarelli, a spokeswoman for the New York-based firm. That period was the worst for trading and investment-banking revenue at the biggest Wall Street firms since the depths of the financial crisis in 2008, excluding accounting gains.

Dimon’s remarks in a presentation today show U.S. investment banks still face pressure as corporations delay raising capital and investors sell riskier assets amid concern that the U.S. economy is weakening and Europe’s debt crisis may spread. JPMorgan’s private-equity unit also expects to post a “modest loss” in this year’s fourth quarter, Dimon wrote in the presentation.

The company’s investment bank generated about $4.5 billion in revenue during the third quarter after backing out a $1.9 billion gain in debt-valuation adjustments. Dimon excluded that accounting effect in forecasting the unit’s revenue in the presentation at a New York investor conference sponsored by Goldman Sachs Group Inc.

Debt Ceiling

Revenue at the investment-banking unit has slid this year from $8.2 billion in the first quarter as concerns mounted in the third quarter that Greece would default and U.S. lawmakers would fail to raise the debt ceiling. JPMorgan told investors in October that the division will face similar market conditions for the rest of the year.

The unit’s long-term prospects show promise, Dimon said in the presentation. Global credit needs may expand by about $160 trillion over the next 10 years and worldwide investment demand may increase from 20 percent of gross domestic product in 2010 to 25 percent by 2030, according to the presentation.

JPMorgan climbed 1.7 percent to $33.80 at 1:22 p.m. in New York, making it the day’s biggest gainer in the Dow Jones Industrial Average.

The bank has a “battleship” balance sheet, and by next year can meet proposed international capital standards that take full effect in 2019, if the board wants to meet them early, Dimon said in the presentation. Dimon has previously referred to JPMorgan as having a “fortress” balance sheet to tout the bank’s overall financial health. The company is the largest and most profitable U.S. bank and was among the only major U.S. lenders to remain profitable throughout the recession.

‘We’re Sorry’

JPMorgan may buy back an additional $950 million in stock approved as part of a $15 billion capital-distribution program by the Federal Reserve, according to the presentation. The allowance “represents a reallocation of previously approved capacity” from the Fed’s 2011 capital tests, he wrote.

The bank completed its $8 billion stock-repurchase plan approved by the Fed in March after buying back $4.4 billion of common equity in the third quarter, for which Dimon apologized.

“We spent a whole $8 billion buying back stock,” he said in an Oct. 13 conference call with analysts. “And yes, it would have been wiser to wait. We’re sorry.”

--With assistance from Michael J. Moore in New York. Editors: Peter Eichenbaum, Steve Dickson

To contact the reporter on this story: Dawn Kopecki in New York at dkopecki@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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