Jamie Dimon won’t buy any more failed banks

JPMorgan Chase CEO Jamie Dimon has become the White Knight of the banking industry, although this has been a winning strategy for him during the recent instability in the sector.

Analysts argue that JPMorgan is getting a boyfriend deal from regulators when it bought the assets of a failed regional lender First Republic earlier this month. But Dimon said Thursday that the acquisition had hidden costs, arguing that it would “distract” the company from other operations and areas of growth.

“People always look at the financial deal. Forget the financial deal,” the CEO lamented in a Bloomberg interview. “We have 800 people working around the clock [on this]. 10,000 people are deployed to consolidate systems, risk, fraud, credit, payments, branches, real estate, vendors, technology, it’s a lot of work.

Dimon said he ended up buying First Republic assets because it was “relatively beneficial for shareholders” and certainly good for the financial system, but that’s not the whole story and he doesn’t plan to make another one. claim. Much work needs to be done to integrate the two banks and create value for JPMorgan’s shareholders, according to the CEO, who added that he must be “ready for the other side of the mountain.”

Dimon’s comments come after a series of crashes in the banking industry that began in March when regional lenders in the U.S. Silicon Valley Bank (SVB) and Signature Bank collapsed, forcing regulators to use the “systemic risk exception” to prevent depositor losses. Not long after, UBS was forced to rescue its ailing Swiss peer Credit Suisse in a $3.2 billion deal which is necessary billions of francs of Swiss taxpayer money to help stabilize markets.

Then, in mid-March, the First Republic began to show signs of tension. The San-Francisco-based lender has many of the same issues as SVB, including a large unsecured depositor base and long-term bond holdings that have lost much of their value. But the Federal Deposit Insurance Corporation (FDIC) and 11 major banks, including JPMorgan and Wells Fargo, coordinated the deposit of $30 billion into First Republic, hoping to shore up the ailing bank. And it seemed to work, at least until April 24 when First Republic revealed in its first quarter earnings report that, despite the help, it lost $102 billion in customer deposits since March. The next day the stock dropped almost 50%.

By May 1, regulators announced that First Republic was out of business and that JPMorgan would acquire its assets, including $173 billion in loans, $30 billion in securities, and $92 billion in deposits. Dimon and company paid $10.6 billion to the FDIC as part of the deal, and pledged to repay $25 billion that other major banks gave to First Republic to help it stay afloat in March. JPMorgan also received $50 billion in FDIC financing at a fixed rate, and the potential to attract clients from First Republic’s $290 billion wealth management business.

While there are many analysts and commentators contended that mega bank got a big buyout of First Republic assets, and lots of them billionaire investor warning that more bank failures would follow, Dimon said he would not buy any more.

“No, I doubt it,” he said Bloomberg. “I mean we’re going to have a lot of blowback to buying it, but it’s the right thing to do.”

This isn’t the first time Dimon has said he won’t take on another failed bank, though. In March 2008, just a few years into Dimon’s tenure as CEO of JPMorgan, he bought the failing investment bank Bear Stearns at just $2 per share ($1.4 billion), 93% below the bank’s last trading price. The deal was also backed by $30 billion in support from regulators and it forced the Federal Reserve to divest Bear Stearns’ most toxic assets.

However, the purchase of that bank, as well as its failed partner Washington Mutual, left JPMorgan on the hook for all its troubles. By 2013, JPMorgan had to pay $13 billion in fines to regulators stemming from problems with the mortgage-backed securities of Bear Stearns and Washington Mutual.

The experience led Dimon to write in his 2015 shareholder letter:

“No, we will not do the same thing as Bear Stearns. I don’t think our board will let me make the call.”

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