There are bad weeks, and then there are bad weeks. JPMorgan Chase & Co. (NYSE:JPM) is having a bad week.
In the space of just four business days, the country’s biggest bank has had its capital return plan sent back to the drawing board, been burned at the stake by Senate inquisitors, and had a confidential management-team downgrade by the Office of the Comptroller of the Currency revealed in the press.
That’s a lot of noise, and none of it is good. As an investor, should you be tuning in or tuning out?
Before we dig into how you should be thinking about all this, let’s give each item a quick overview:
Stress-test mess: Last Thursday afternoon, the Federal Reserve released the final results of its annual stress tests. In a nutshell, JPMorgan Chase & Co. (NYSE:JPM) performed admirably, if not exceptionally.
But while the Fed did approve the superbank’s proposed capital actions — a 26.6% quarterly dividend increase and $6 billion in share buybacks — it made them conditional on the bank coming back with a revised process plan. The upshot is, however, if the Fed doesn’t like the new plan, it could deny the proposed capital actions.
Senate inquisition: Last Friday, former bank Chief Investment Officer Ina Drew, former Chief Financial Officer Doug Braunstein, and other bank officers faced congressional grilling from Senator Carl Levin and his colleagues over the handling of last year’s London Whale trading debacle. As CEO Jamie Dimon was not present at the hearing, he was grilled in absentia.
The questioning came in the wake of a 300-page Senate report on the scandal released the day before. Neither the report nor the questioning cast the bank’s handling of the London Whale in a good light, to say the least.
Management-team downgrade: Today, The Wall Street Journal is reporting that the Office of the Comptroller of the Currency downgraded JPMorgan Chase & Co. (NYSE:JPM)’s management team — last July — as a result of the then-hotly followed London Whale trading scandal. The bank’s score changed from a 2 to a 3, indicating that management “needs improvement.”
This too shall pass
Shares of JPMorgan were down by 0.16% yesterday alone, and 2.62% since last Thursday. After reading through the above, it’s probably not hard to figure out why. This is a lot of bad news in a short period of time, and investors are worried.
But I just don’t think there’s any cause for long-term alarm. In fact, this might be the perfect time to buy into the bank if you haven’t already, or to buy more shares if you already own some.
For starters, in due time, the stress-test stress shall pass. Jamie Dimon and his team are some of the smartest cookies on the banking block, and whatever sort of changes the Fed is requesting to the superbank’s proposed capital-return action plans, they will almost surely be made to the central bank’s liking.