Chairman and CEO Jamie Dimon's interaction with shareholders does not give the appearance of an executive suffering under the strain of the worst financial crisis since the Great Depression.
One shareholder at the company's annual shareholder meeting last month in downtown Manhattan thanked Dimon for his leadership, while another said she put "a lot of trust" in what he says. More attendees lined up after the meeting to express to Dimon that he was doing a good job and to shake his hand.
It's not hard to understand Dimon's popularity with investors, as fellow CEOs Vikram Pandit at
and Ken Lewis at
Bank of America
have come under fire amid plummeting share prices.
Excellent leadership, good risk management measures and simply being in the right place at the right time when it came to the acquisitions of
have all played a part in JPMorgan emerging from the crisis as one of the strongest-positioned banks.
JPMorgan Chase Chairman and CEO Jamie Dimon.
"They're a well-run organization," says Larry Tabb of the consulting firm Tabb Group. "They tend not to take excessive risk. They tend to work closely with clients to make sure they're producing the best services and products they can, but when it comes down to going over the top, somehow through a good risk management backbone, they've stayed away from getting tripped up."
The company's assets as of the end of the first quarter topped $2 trillion, while its market cap is $137.36 billion, ceding it the No. 1 spot in front of
and Bank of America.
JPMorgan Chase shares are down about 28% since a 52-week-high in October. The stock has fared much better when compared to Citi shares, which are down 84% from an October 52-week-high. BofA shares have sunk 72% from a 52-week high in September, while Wells Fargo's stock is down 43% from the same time period.
JPMorgan Chase was one of the few large banks to post a profit in every quarter in 2008 and the first quarter of 2009.
The federal government last fall acquired a $25 billion preferred equity stake in JPMorgan through the Troubled Asset Relief Program. But unlike rivals Citigroup and Bank of America, JPMorgan did not have to go back for a second injection. Recent government stress tests also confirmed that JPMorgan is one of nine of the nation's 19 largest banks that do not need more capital to withstand possible worse conditions in the economy.
As rivals focus on plugging capital holes and other bleeding within their firms, JPMorgan is now looking to repay the TARP funds -- capital that Dimon adamantly says the company didn't need in the first place.
expects to raise $5 billion in common equity and repay the federal government's $25 billion bailout investment by the end of June, it said Monday.
Last year "may have been our finest year ever," Dimon said during the shareholder meeting last month.
The company "let the crisis come to them. They didn't go to the crisis," says Eric Schopf, a vice president at Hardesty Capital Management, which invests client funds in JPMorgan Chase shares. "By waiting up until the very end, they played their hand very well."
JPMorgan agreed to acquire Bear Stearns over a March 2008 weekend as the securities firm teetered on the brink of failure. The deal presented a way for JPMorgan Chase to boost its commodities and equities business and build ample prime brokerage operations, but bank executives were concerned over the risk that Bear Stearns held on its balance sheet.
It got the government to agree to backstop some $30 billion against illiquid securities, largely backed by mortgages, held by Bear, compared to the $370 billion in total assets it ended up acquiring, and in the end paid $1.5 billion.
The move was considered brilliant financially and strategically, despite the risk. But Dimon, in typical fashion, did not boast.
The price paid would have been considered low by normal standards, "
but these were not normal conditions, and because of the risk we were taking, we needed a huge margin for error," Dimon wrote in the company's annual shareholder letter. "We were not buying a house -- we were buying a house on fire."
Ultimately, JPMorgan Chase says the Bear Stearns deal will add approximately $1 billion of annual earnings to the company. It also helped the company climb to the No. 1 position in global M&A advisory and global debt capital markets bookrunner rankings, according to Dealogic.
In the fall, JPMorgan Chase bought Washington Mutual for $1.9 billion, after it was seized by the Federal Deposit Insurance Corp. WaMu was suffering from oncoming losses from the subprime and option adjustable-rate mortgages it had made to borrowers who were less than creditworthy.
JPMorgan purchased the firm's deposits, assets and some liabilities for just $1.9 billion. With it came some 2,200 branches mostly on the West Coast, where JPMorgan Chase lacked a presence.
Financially, the deal was "immediately accretive" to JPMorgan Chase and is expected to add $2 billion, or 50 cents a share, to the company's 2009 earnings and "increasingly more thereafter," according to Dimon's letter.
But Dimon and his team admit that they are not immune to credit problems elsewhere. JPMorgan Chase's home equity portfolio was a source of trouble as the credit crisis revved up. The company has repeatedly acknowledged mistakes were made in originating riskier loans -- particularly those loans made through brokers that required little documentation requirements.
More recently, the bank is warning of high credit card losses as unemployment soars to 8.9%. The company says it does not expect to make any money in the credit card business this year.
Risk management has been a priority for Dimon and his team. The CEO has repeatedly stressed the need for a "fortress balance sheet," which proved to protect the company during these unprecedented times, observers say. The company boasts some of the strongest loan loss reserves amongst its peers.
JPMorgan Chase in late February slashed its dividend to conserve capital, by 86% as a precautionary step. The move is expected to save JPMorgan Chase $5 billion a year.
"It's the heart of the culture that Jamie Dimon has built, which is
to be skeptical and probing and not taking on excessive unnecessary risk," says Tom Kersting, senior financial services analyst at Edward Jones. "They certainly have exposure to some of the problem areas, but they just mange through it so much better because their financial position was better heading into the crisis."
While Citi and BofA have been "chasing" the problem of ever-increasing loan losses, "JPMorgan has been in front of it," says Tom Hepner of Ruggie Wealth Management.
But perhaps the most dynamic point to the JPMorgan Chase story is its leadership.
Dimon "is just a superior manager," Hepner says. "Jamie Dimon has to a large degree been able to hold onto his reputation," while reputations of contemporaries like Pandit and Lewis, "have been scarred or diminished."
Dimon comes across as a "plain-talking guy," who has managed to charm Wall Street, as he tempers expectations by offering an often cautious outlook.
Dimon has also been a regular on the public speaking scene amid the crisis, as he seeks to calm investor worries but also share his opinions and remind people how JPMorgan is being a good corporate citizen, which has earned him respect.
"I think at this point in time the industry really needs a leader and most of these organizations -- their leadership has been very quiet," Tabb says.
On the retail side, JPMorgan Chase's branch and ATM network "is one of their key strengths," says Michael Beird, director of banking services at J.D. Power and Associates.
Critics say JPMorgan's retail banking strategy is average at best. But Charlie Scharf, JPMorgan Chase's head of retail financial services, says the strategy is not about trying to come up with something unique from other large competitors like Wells Fargo or BofA.
"There are 8,000 banks in this country today that we compete against," Scharf says in a recent interview with
. "What we sit in a room and
say is 'What can we do that's really great for our customer and makes sense for us economically?' This isn't an industry where you know you've got to come up with something totally new and different to succeed. What we've got to do is a great job for our customers every day and they'll do business with us."
Kersting says there is a "huge opportunity" to build its retail strategy with Washington Mutual, as the deals Dimon and his team took a chance on help drive the company's future success.
"JPMorgan was anointed as the golden child and it seems to be either Jamie Dimon was an excellent negotiator or he was given opportunities that simply weren't present to others," says Hardesty's Schopf. "I think that has given them the growth platforms to hit even much higher stock prices going out."