Jamie Dimon, the chief executive officer of JPMorgan Chase & Co. (JPM:US), said banks are accumulating more capital than they need as regulators push lenders to build equity.
“I don’t think it’s just JPMorgan,” Dimon said yesterday at a conference discussing the New York-based company, which disclosed plans to eliminate as many as 19,000 jobs. “I think all banks will have too much capital in two and a half years. And they’re not going to know what to do with it.”
Dimon, 56, has said excessive regulation could impede growth as international authorities and the Federal Reserve push banks to guard capital to better withstand another financial crisis. JPMorgan halted buybacks (JPM:US) under pressure from regulators last year after uncovering a trading loss at its chief investment office that swelled to more than $6.2 billion.
The CEO, responding to analysts’ questions, dismissed the argument that clients may switch to banks that have the highest capital ratios. Zurich-based UBS AG (UBSN) is targeting a Basel III common-equity ratio equal to 13 percent of risk-weighted assets.
“What I hear UBS saying in their presentations is, ‘If I’m an affluent customer, I’ll feel a lot better about going to UBS knowing that they have a 13 percent capital ratio than another big bank with a 10 percent ratio,” said Mike Mayo, an analyst at CLSA Ltd. “Do you agree with that or disagree?”
Dimon countered, “so you would go to UBS” rather than JPMorgan?
“I didn’t say that,” Mayo responded. “I said that was their argument.”
“That’s why I’m richer than you,” Dimon said, drawing laughter from the audience.
JPMorgan said that by the end of this year its capital will account for 9.5 percent of risk-weighted assets under rules planned by the Basel Committee on Banking Supervision.
The lender, employing about 259,000 people at the end of December, will cut 13,000 to 15,000 jobs in its mortgage unit and 3,000 to 4,000 in community banking, excluding home lending, through the end of next year, the bank said in presentations on its website. Staff companywide will shrink by about 4,000 this year, mainly through attrition, while some employees are redeployed within the firm, said Kristin Lemkau, a spokeswoman.
JPMorgan fell 0.2 percent to $47.60 yesterday. The shares climbed 8.3 percent this year, beating a 3.9 percent gain for the 24-company KBW Bank Index. (BKX)
The biggest U.S. banks are lending the smallest portion of their deposits in five years as cash floods in from savers, a slow economy damps demand from borrowers and regulators push financial firms to bolster themselves against any future credit crisis. The average loan-to-deposit ratio for the top eight commercial banks fell to 84 percent in the fourth quarter from 87 percent a year earlier and 101 percent in 2007, according to data compiled by Credit Suisse Group AG. JPMorgan had the lowest ratio in the group at 61 percent.
“I don’t want to say it’s anti-American” to be held to international standards, Dimon said, adding that the bank’s assets include highly rated securities. “That balance sheet (JPM:US) is almost as liquid as you can get.”
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