In its statement yesterday, JPMorgan had announced a suspension of $15 billion buyback plan that it was going to pursue. The move comes less than two weeks after CEO Jamie Dimon announced a $2 billion trading fiasco coming out of a trade which went miserably wrong at the Chief Investment Office. According to Dimon the suspension move was a part of the policy to keep the firm on track trying to meet the capital requirements under Basel III. Dimon, the once King of Wall Street now disposed, insisted that the move had nothing to do with the trading loss that came into limelight on May10. He also added that the trading loss had barely managed to nick the balance sheets of JPMorgan.
A lot of analysts and investors seem to have lost faith in Dimon , and there are speculations running that the overall loss out of the trading fiasco could be well beyond the $3 billion worst case scenario estimated by Dimon. A lot of investing and analytical firms are putting the loss to be somewhere around $7 billion.
With its every attempt of providing answers, JPMorgan is ending up raising more questions. The stock is trailing by 20 % ever since the trading loss was made public and is trailing by more than 30 % since the start of Q2. Given Dimon’s claim of balance sheet being strong, the buying of shares should have been hands over fist. What adds to the mystery of the whole situation is that no matter what the firm is explaining right now, there was hardly a need of announcing the suspension at this point.
Firms all over fail to follow through in such cases and on regular basis , and with JPMorgan still having better of the year still in hand, the announcement was completely unnecessary. By doing so , they have just added more confusion to the current situation.
On March 13 , they had announced that purchases of shares had boosted the dividend , right after announcing that they had cleared the Stress test or the Fed’s Comprehensive Capital Analysis and review. The CEO had jammed the results in the face of Fed , when the release could have been done after hours of markets as planned. The gloating , helped him in marling the top of his reputation and the firm’s balance sheet. However, now the estimates are being slashed at a pace faster than JPMorgan can lower their guidance while Dimon continues to be ineffectual and defiant. He is still insisting on the fact that the firm will pay out the 30 % dividend , which seems very difficult.
The stocks is rallying , even as the storm clouds for it seem to get darker. It might be because the stock has already seen the bottom but there could be more bad news coming on its way. To buy the dip would be similar to making an investment.
