The nation’s largest bank by assets, JPMorgan Chase & Co. (NYSE:JPM) , reported earnings for the first quarter of the year this morning. It was a strong performance by almost any measure. Net income was up by 33% on a year-over-year basis, mortgage originations soared, and the bank socked away more capital for a rainy day. What follows are some of the more notable quotes and exchanges from the bank’s conference call with analysts.
1. Jamie Dimon just doesn’t get it
Here’s an exchange between Glenn Schorr, an analyst at Nomura, and Jamie Dimon about the ongoing debate about too big to fail banks. Pay particular attention to the final sentence of Dimon’s response.
Glenn Schorr: “I know [you] addressed some of this in your shareholder letter, but between everything related to Basel III, Dodd-Frank in place already, and [other regulations] coming online, it feels like we’re going down the path on containing too big to fail but there’s still a steady drumbeat … to change things. Just curious on where we’re headed on this and what will stop the drumbeat? When is enough, enough?”
James Dimon: “[T]he reason you have companies is they serve clients well at a good cost. There’s a reason our numbers are good because we have cross-selling clients come to us. And there’s a reason for global banks just as there are reasons for community banks. I think that the real issue, again, and you guys do the numbers is, the banking system has gotten so much stronger in the United States. And it’s not just capital, but it’s capital, liquidity, oversight, all sorts of activities that people didn’t like in order been done, derivatives clearing houses. And the initial wave of living wills, et cetera, should all work. I hope at one point we declare a victory and just stop eating our young at this thing.”
The point here is that Dimon’s perspective reaffirms many critics’ belief that Wall Street bankers are out of touch with the rest of the country. With an elevated unemployment rate and vast swaths of houses still underwater, there are few ordinary Americans that would equate the current state of banking (in which JPMorgan Chase & Co. (NYSE:JPM) and others are recording record profits) to eating our youth.
2. Why buybacks are nothing to write home about
Here’s an exchange between John McDonald of Sanford Bernstein, JPMorgan’s CFO Marianne Lake, and Jamie Dimon about the fact that JPMorgan Chase & Co. (NYSE:JPM)‘s outstanding share count increased despite the fact that the bank repurchased $2.6 billion in shares over the quarter.
John McDonald: “You did a healthy buyback this quarter but share count didn’t shrink that much. Is the first quarter heavier than usual in terms of your issuance? And the question is getting at, [would] $2.6 billion of buybacks . . . be expected to shrink the share count in quarters when it’s not the first quarter?”
Marianne Lake: “Yes, that’s right, John.”
John McDonald: “Okay. So your issuances more weighted toward the first, is that right?”
Marianne Lake: “Yes, yes. But also remember, we didn’t buy back shares in the fourth quarter or the third. So there is an overall, overall net $2.6 billion, close to $2.6 billion net of provisions.”
John McDonald: “I’m not seeing how that translates into the reduction in the share count. It’s kind of offset by what you do in issuance, right, each quarter?”
Marianne Lake: “Yes.”
John McDonald: “And was this a normal quarter of issuance, so a $2.6 billion buyback would keep the [share count] flat? Is that the kind of share ratio we might expect?”