JPMorgan CEO Writes in Shareholder Letter: Expecting 'a Bad Recession'
April 06 2020 - 9:04AM
Dow Jones News
By David Benoit
JPMorgan Chase & Co. Chief Executive James Dimon said his
bank hasn't sought looser regulations to help it handle the
economic collapse caused by the coronavirus pandemic, detailing
instead its ability to keep lending in even more dire
circumstances.
In his annual letter published Monday, Mr. Dimon said the work
preparing JPMorgan to be a "port in the storm" -- a long obsession
of his -- means the bank can handle what he expects to be a "bad
recession."
In internal stress testing, he said the nation's biggest bank
would be able to increase lending to clients even if U.S. GDP were
to drop 35% in the second quarter and stay there for the remainder
of the year. Only then would the bank consider cutting its
dividend, he wrote. JPMorgan and other big U.S. banks have already
suspended buybacks.
That kind of collapse, once considered unthinkable, is now in
line with some economists' predictions for the second quarter this
year, though others expect a substantive rebound in the third
quarter.
"Entering into a crisis is not the time to figure out what you
want to be," Mr. Dimon wrote. "You must already be a
well-functioning organization prepared to rapidly mobilize your
resources, take your losses and survive another day for the good of
all your stakeholders."
Writing only a month after undergoing emergency heart surgery
and days after returning to work, Mr. Dimon released his letter as
the bank deals with unprecedented economic turmoil. Mr. Dimon threw
out his usual template for his annual letter -- detailing the
bank's success and his views on public policy -- to address the
coronavirus crisis, which he said he expects to be "a bad recession
combined with some kind of financial stress similar to the global
financial crisis of 2008."
He said his bank has taken steps to protect employees and keep
them safe, sending them home faster and more broadly than any plans
the bank had. That's while seeing record volumes in securities
trading, extending new loans to small businesses and delivering
$1.9 billion in cash to smaller community bank clients, he said.
Companies have already drawn down more than $50 billion in credit
lines to prepare for the crisis, which Mr. Dimon said "dramatically
exceeds what happened in the global financial crisis." The bank
approved more than $25 billion in new credit extensions in
March.
"While conditions may sometimes be unusual and difficult, we are
functioning smoothly," he wrote.
The bank has closed some branches but still has thousands of
employees at work in its retail operation and has seen an outbreak
of the virus on its trading floor.
What the bank hasn't done, Mr. Dimon said, is ask the government
to relax the rules that force JPMorgan and other U.S. banks to bulk
up capital levels, which he and others have long said would
restrain lending in a crisis. He suggested that the rules perhaps
should be loosened, but called it a conversation for another
time.
"Saying that we will not ask for regulatory relief does not mean
the government shouldn't change some rules and regulations,
however," Mr. Dimon wrote. "While a lot of the rules were
constructive and made the financial system stronger, we are now
seeing the impact of poorly coordinated, poorly calibrated and
poorly organized rulemaking."
Typically Mr. Dimon's annual letter is full of ideas on fixing
public policy, but that was largely removed this year other than to
urge the country to come together and to criticize the initial U.S.
response.
"The country was not adequately prepared for this pandemic --
however, we can and should be more prepared for what comes next,"
he said.
Mr. Dimon, 64, only briefly acknowledged he had been out --
thanking his team for running the bank -- and provided no new
updates on his health or whether it would change his plans on how
long he would stay at the bank.
Write to David Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
April 06, 2020 08:49 ET (12:49 GMT)
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