Jamie Dimon: 4 questions for CEO as bank earnings loom
JPMorgan Chase and its CEO, Jamie Dimon, have some explaining to do.
The bank's top executives will spend two hours answering questions from financial analysts on Friday — twice as long as usual — when the bank reports its quarterly earnings.
At the top of the agenda: An update on the surprise $2 billion loss in one of JPMorgan's units. Investors have shaved 15 percent off the company's stock price since the loss was announced May 10.
The disclosure has triggered investigations by government agencies and hearings in Congress. Dimon has apologized repeatedly and has said the bank was trying to hedge against financial risk, not trade for its own profit.
Here are four key questions for Dimon and the bank on Friday.
1. Just how big is the loss?
Dimon warned from the start that the loss could grow, but no one is sure how much. Published reports have suggested it could be as high as $9 billion. The loss came from an ill-timed bet using complex financial instruments called derivatives. Their value probably fell sharply because there were few buyers left in the market.
2. What about clawbacks: Who and how much?
Dimon told Congress in June that top executives responsible for the loss could have their pay taken back by the company, a process known as a clawback. Under bank policy, stock grants and bonuses can be recovered from executives, even for exercising bad judgment, but JPMorgan has never exercised the right. Among the most likely candidates would be Ina Drew, JPMorgan's chief investment officer, who oversaw the division responsible for the loss and left the bank days after the disclosure.
3. How will Dimon handle himself?
Dimon is blunt and assertive. He's been contrite with shareholders, calling the mistake "egregious and self-inflicted," and has apologized in front of the Senate. But Dimon doesn't back down when he's pushed. At one hearing, when Rep. Sean Duffy, R-Wis., asked Dimon whether JPMorgan losses could hypothetically top half a trillion dollars, Dimon replied: "Not unless the Earth is hit by the moon." It's highly unlikely analysts would go that far because Dimon has a reputation of skewering anyone who goes too far out of line.
4. What's the impact on JPMorgan's profits?
On the day Dimon disclosed the trading loss, he said JPMorgan was still expected to report a profit of about $4 billion for the second quarter. Analysts now expect JPMorgan to earn $3.2 billion, according to estimates provided by FactSet, a financial data service. Analysts have lowered profit forecasts for JPMorgan both because of the trading loss and because of challenging conditions for banks, including few corporate deals and economic concerns.
