JPMorgan CEO Considers Dividend Hike in 2011

Wednesday, 12 Jan 2011 11:39 AM

 

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JPMorgan Chase could pay an annual dividend of 75 cents to a dollar once the Federal Reserve completes stress tests of the largest U.S. banks and gives its approval, Chief Executive Officer Jamie Dimon said.

The bank could raise its dividend as soon as the second quarter 2011 if the Fed approves, Dimon said in an interview with cable news channel CNBC after his keynote address at the JPMorgan Chase Healthcare Conference.

Dimon's comments come as the 19 largest U.S. banks — including JPMorgan and rivals Bank of America Corp. and Citigroup Inc. — are undergoing a second series of stress tests by the Fed since the 2008 financial crisis.

The Fed is gauging whether banks have enough capital to weather another economic shock, and are similar in structure to the first stress test in 2009.

If a bank passes, investors are expecting dividends to increase shortly thereafter.

"We will be adequately capitalized even in a stressed situation, so when they finish these tests we're hopeful we'll be allowed to go back to paying normal dividends," Dimon told an audience of investors at a bank-sponsored healthcare conference.

JPMorgan currently pays an annual dividend of 20 cents, with a dividend yield of 0.4 percent.

A dividend of 75 cents to a dollar would generate a 1.7 percent to 2.2 percent yield.

The bank paid a 38 cents per share quarterly dividend in 2008 and the first quarter of 2009.

While banks are unlikely to return to large dividend payouts made before the financial crisis as profits soared, bank CEOs now are typically targeting a dividend payout equal to 30 percent of earnings.

 

PAYOUTS OF YESTERYEAR

Before the financial crisis of 2008, banks generally targeted dividend payouts of 40 percent of earnings.

Dimon said the housing market looks better than a year ago and is showing signs of stabilization.

He said U.S. banks are about two thirds of the way through their foreclosure crisis and that he opposes a possible moratorium, as some consumer activists have called for.

"It's an ugly mess. We're going to work our way through it," he said. "If you can't foreclose on houses, you won't have a mortgage market in America," he said.

The Treasury has resisted calls for a nationwide moratorium on home foreclosures, arguing that this would slow the recovery of the U.S. housing sector by delaying bank sales of properties for months and leaving too many houses vacant.

Dimon warned that the federal and state governments need to aggressively tackle their fiscal deficits.

"We absolutely have to show fiscal discipline or there will be adverse consequences," he said. "It will happen, just like you see it happening in the sovereign countries of Europe. The laws of economics are not going to change for the United States."

JPMorgan shares closed up 0.46 percent on Tuesday at $43.60 on the New York Stock Exchange.

© 2014 Thomson/Reuters. All rights reserved.

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