Ever since May, there’s been a $6.2 billion cloud hanging over JPMorgan’s (NYSE:JPM) head. America’s top bank saw its share price crash to near 52-week lows after announcing massive losses in the first half of the year, tarnishing the previously glowing reputation of CEO Jamie Dimon. To stack on top of the losses, New York attorney general Eric Schneiderman sued Bear Stearns, a JPMorgan acquisition, for criminal treatment of investors who bought mortgage-backed securities.
The losses and lawsuits compounded into a general evaporation of faith in one of the world’s most reputable banks. With industry partners like Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) under fire, the LIBOR scandal fresh on the public’s mind, and the government cracking the whip on MBS-related activity, many investors decided to pull their money from financial stocks.
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To say the least, Jamie Dimon may have found this lack of faith disturbing. Arguably the world’s most clever banker, Dimon has aggressively pushed to increase shareholder value and in a matter of months catalyzed the recovery of his bank’s stock price. Shares are once again trading over $40 with upward momentum behind them. The analysts maintain a “Buy” consensus and a mean price target of $47, which would put the stock price over its April peak.
This would be a respectable recovery in any stock price, but it is particularly impressive for JPMorgan given the scope of its losses. The bank seems impervious to long-term damage caused by even substantial blunders. Dimon proves himself as a savvy a manager of risk as ever, this time curbing losses in his company’s share value with dividend hikes and massive share repurchases. On Thursday, the bank disclosed that regulators approved a buyback program of up to $3 billion, a step towards Dimon’s $15 billion buyback initiative he proposed in March.
Earlier in the year, JPMorgan raised its dividend by 20 percent for an annual yield of 2.8 percent.
The London Whale Trade may ultimately become a forgivable disaster. JPMorgan is known for dodging risk, and losing shareholder confidence is clearly a risk. Recognizing this, the bank looks committed to providing value to shareholders despite what amounts to a history-making mistake.
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