* Bank approved to spend $3 billion to buy own stock
* Company reaches deal with SEC staff on two mortgage probes
* Investigations of "London Whale" loss continues
* Stock rises as much as 2.5 percent
By David Henry
Nov 8 JPMorgan Chase & Co said it plans
to buy back as much as $3 billion of stock early next year after
U.S. regulators authorized it to buy shares again, the latest
sign the largest U.S. bank is healing after big trading losses.
The bank halted its share repurchases in May when it said it
was going to suffer at least $2 billion of trading losses from
bad bets on credit. Those losses ballooned to more than $6
billion. The bank now believes that most of the pain is in the
The company disclosed the buyback approval on Thursday in a
quarterly filing in which it also revealed that it has reached
"an agreement in principle" with the Securities and Exchange
Commission (SEC) to resolve two previously-disclosed
investigations related to mortgage-backed securities.
The Federal Reserve told the bank on Nov. 5 that it had
approved the plan, JPMorgan said in the SEC filing.
The company is moving past the losses from what became known
as the "London Whale" trades, for the trader who entered at
least some of the positions. The regulatory consequences are
JPMorgan disclosed that it is still responding to
investigations into the debacle by government authorities in the
United States and the United Kingdom.
The losing derivatives positions were disclosed by JPMorgan
on May 10, more than a month after reports surfaced in the
credit markets that Bruno Iksil, a London-based trader for
JPMorgan known as the London Whale, had made massive bets in
The approved plan provides for JPMorgan to continue paying
its current quarterly dividend on common stock, the filing said.
JPMorgan spent $9 billion in 2011 to buy back its shares. It
was on track to spend as much as $12 billion this year until the
derivatives losses surfaced.
CEO Jamie Dimon told investors on May 21 the bank had
suspended repurchases of its stock to rebuild its capital and
meet higher requirements for financial safety.
Under restrictions imposed after the financial crisis,
JPMorgan and other big banks cannot buy back stock or increase
their dividends without approval from the Federal Reserve. Those
restrictions came about because many banks paid out too much
capital in 2007 and 2008 as the mortgage crisis widened, leaving
them weaker when they were hit by big losses.
JPMorgan must submit another plan to the Federal Reserve,
and get approval, to be able to continue using capital to buy
back stock after next March. The newest approval suggests that
JPMorgan will be allowed to spend at least $12 billion next
year, analyst David George of Robert W. Baird & Co noted in a
The current dividend, which is 30 cents a share, costs the
company about $4.5 billion a year. If the company were to pay
out that much in dividends and spend $12 billion buying its
stock, the total return of capital to shareholders of $16.5
billion would amount to about 80 percent of net income that
analysts expect the company to earn in 2013.
In mid-day trading on the New York Stock Exchange, JPMorgan
stock rose 0.9 percent to $40.86 after being up as much as 2.5
AGREEMENT WITH SEC
The company did not provide an estimate of how much the
settlements with the SEC over mortgage securities could cost.
One of the cases stems from disclosures by JPMorgan of
delinquencies involving one mortgage-backed securitization. The
other case is over multiple securitizations by Bear Stearns, the
failed investment bank that JPMorgan took over in March 2008 in
the financial crisis.
The company had disclosed in February that the SEC had said
in January that it was considering whether to recommend taking
action against the company for the two matters.
The company faces numerous other investigations and private
lawsuits stemming from the financial crisis and from the Whale
In the filing Thursday, JPMorgan raised its estimate of how
much litigation could cost the firm above its legal reserves to
$6 billion from $5.3 billion disclosed three months ago.
The company also said it is "in the early stages" of
counting the potential impact of Hurricane Sandy hitting the
East Coast on October 29. The bank has waived some checking
account and loan fees for late payments.
The total financial cost of Sandy to the bank will depend in
part on the losses its borrowers suffer after collecting
insurance proceeds and government assistance, the filing said.