Buoyed by cautious investor optimism, U.S. stock markets inched higher on Wednesday. Yet you wouldn’t know that from the performance of otherwise powerful American bank JPMorgan Chase (NYSE: JPM). Shares of the lender slumped by more than 2% on the back of remarks from its high-profile leader.
Dimon, in the rough
That morning, long-serving JPMorgan Chase CEO Jamie Dimon spoke in a fireside chat during the Bernstein Strategic Decisions Conference about his company’s future.
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In the wide-ranging discussion, Dimon gave his thoughts about crucial elements of the company’s business. He signaled some doubt about the capital markets, in which JPMorgan Chase is a notable participant.
“It’s gung-ho, folks,” he said of the segment. “There’s a lot of exuberance out there, so yeah, right now, it’s good, but it was in ’72, ’86, 2000, 2007. That doesn’t give me comfort.”
While Dimon expects the bank to post a 10% year-over-year increase in investment banking and securities trading revenue in the second quarter, he believes overall annual expenses will come in at nearly $106 billion, roughly $1 billion higher than previous guidance.
Separately, Dimon revealed that JPMorgan Chase is sniffing around for a big-ticket acquisition to complement its operations. “I do think there might be, in the next couple of years, a chance to put $10 [billion] to $20 billion to work buying something,” he said, although he didn’t get more specific about potential targets.
A contrarian view
Dimon is cautious by nature, so this is hardly the first time he’s made glass-half-empty/half-full pronouncements on JPMorgan Chase and its business environment.
Instead of being spooked by the (not very significant) projected rise in expenses and the high acquisition budget, I’d be encouraged that the company is operating in a thriving capital markets environment and has sufficient capital for a major acquisition. JPMorgan Chase stock remains a buy for me.
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