Jan 16 JPMorgan Chase & Co plans to reduce share buybacks in 2013 in a bid to build capital to meet stricter international standards by the end of the year, Chief Executive Jamie Dimon said on Wednesday.
JPMorgan plans to buy back as much as $3 billion of its own shares in the first quarter of this year, but less after that, Dimon said on a conference call with analysts after the largest U.S. bank reported quarterly results. The bank has been buying back stock at the rate of about $3 billion per quarter, he said.
The bank has also asked the U.S. Federal Reserve for approval to increase its quarterly dividend of 30 cents per share, he said.
The moves come as part of the capital plan that JPMorgan submitted to the Fed earlier this year for an annual "stress test" of major banks' ability to withstand adverse economic scenarios.
The more conservative capital stand comes after JPMorgan, the largest U.S. bank, temporarily halted share buybacks in May, following trading losses in its Chief Investment Office.
The losses - known as the "London Whale" trades after the nickname that hedge fund traders gave to JPMorgan trader Bruno Iksil - topped $6 billion.
The losses also led to the bank cutting Dimon's annual bonus in half.
The Fed gave JPMorgan permission in November to resume buybacks. When asked if increased regulatory scrutiny spurred by the trades had played a role in the bank's conservative capital plan, Dimon said: "Not really."
"Everybody is doing it, and obviously we should not lag," Dimon said of other banks' efforts to meet new Basel III capital standards.
The bank expects its Tier 1 common equity ratio - a measure of core capital - to exceed 9.5 percent by the end of the year, making it compliant with the new rules ahead of schedule. The ratio was at 8.7 percent at the end of the fourth quarter.
JPMorgan also wants to make sure it has enough capital under Fed stress test models, Dimon said, even though the bank doesn't fully understand them.
The government's review aims to determine whether 19 large U.S. banks would have enough capital to weather a severe recession and continue lending. Bankers have complained that the Fed's projections differ from their own internal stress tests.
"We think under severe stress we'd have plenty of capital, but last time the Fed's numbers were very different," Dimon said. "We don't understand that."
The 19 banks were required to submit their data to the Fed by Jan. 7, including requests to increase dividends and buy back more shares.
The Fed is expected to release stress test results in March. Banks will also release the results of their own tests this year under a provision in the 2010 Dodd-Frank financial reform law.