JPMorgan Chase Seeks to Reduce Excess Cash, Increase Share Buybacks
Fresh off a record year for profit and revenue, JPMorgan Chase is facing a “high-class problem”: a mounting pile of tens of billions of dollars in excess cash. The bank’s CFO, Jeremy Barnum, admitted that the excess capital, estimated to be around $35 billion, is a growing concern and is seeking to reduce it through share buybacks.
The bank’s executives have hinted at the risk of a recession ahead, citing a “tension” between the risks in the economy and high asset prices in the market. A sharp economic downturn could provide an opportunity for the bank to deploy more of its excess cash through loans, according to analyst Charles Peabody.
JPMorgan’s CEO, Jamie Dimon, has been hesitant to buy back stock in the past, citing the bank’s valuation as too rich. However, the bank’s stock has only appreciated since then, and investors and analysts are now calling for the bank to reduce its cash pile.
The bank’s CFO has indicated that the bank will continue to produce organic capital generation and will seek to deploy excess capital through buybacks unless it finds opportunities for organic deployment. With the incoming Trump administration likely to propose less stringent regulatory rules, JPMorgan is facing pressure to reduce its cash pile and increase share buybacks.
While some analysts expect the bank to be disciplined in its approach to capital deployment, others believe that the bank may pull back on buybacks from current levels due to pressure from shareholders. With the end of an economic cycle still on the horizon, JPMorgan’s approach to excess capital will be closely watched by investors and analysts.