Tuesday, January 10, 2012

Dimon on CNBC

Jamie Dimon, CEO of J.P. Morgan Chase (JPM) was on CNBC yesterday and reiterated that the current stress test banks are undergoing in the U.S. will be a non-issue for JPM.   This is not new news, but it is interesting that he said that JPM will have a Tier 1 common equity ratio of 7-8% versus the required 5% *after* the stress test.  This ratio was at 9.9% or so after the end of the last quarter.

The stress test was something like:
  • Unemployment goes up to 13%
  • Housing prices down another 20% from here
  • Stock market down 50%
  • Catastrophe in the U.S. and Europe (I assume financial problems, like sovereign defaults etc...)

So that's pretty solid; to be able to withstand all that with a 7-8% Tier 1 capital ratio.

Maria Bartiromo also asked Dimon if he thought the JPM stock price was trading at less than intrinsic value and he said "I think so, yeah".

He also said that investors may be surprised this year (by the market in general).  When people are this negative and bearish, when things clear up people might start flooding back into the markets again.

Anyway, his call is no better than anyone elses but I do listen because Dimon is definitely not a promotional type (he was bearish and calling for big problems *before* the financial collapse) and he does get to see a lot of what is going on in the economy and unlike most CEO's, he is as a straight shooter as there is (despite the seeming consensus to the contrary (everyone seems to think all bankers are dishonest, unethical etc...)).

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