Jamie Dimon on Thursday expressed JPMorgan Chase’s desire to be free from government intervention, calling the US Treasury’s toxic assets plan “irrelevant” to his bank and saying the lender could immediately repay $25bn in federal aid without raising new capital.
The chief executive’s comments underscore the belief at healthier banks, such as JPMorgan and Goldman Sachs, that severing financial ties with the government would give them an edge on weaker rivals.
However, JPMorgan’s eagerness to repay the government and unwillingness to participate in the toxic asset plan could deepen investor fears of a polarisation of the US banking sector with some banks recovering and others, such as Citigroup and Bank of America, remaining mired in the crisis.
After JPMorgan reported strong first-quarter results driven by record investment banking profits, Mr Dimon said that being a recipient of government funds was “a scarlet letter” that had brought banks unwanted political and regulatory constraints.
He said his bank could repay “tomorrow” the government aid it received last year. But, unlike Goldman, which raised $5.5bn this week to help repay its $10bn capital injection, JPMorgan needed no extra capital.
Government officials have encouraged banks to raise equity before repaying funds to show their financial strength. But Mr Dimon said JPMorgan’s capital position was strong. “I don’t see why a company with that kind of capital would have to raise capital . . . what Goldman did is what Goldman did. It has nothing to do with us.”
Mr Dimon vowed not to participate in the authorities’ $1,000bn plan to help banks sell toxic assets to public-private partnerships, partly because of the risk of further government scrutiny.
“We manage our assets. If we want to buy them we buy them, if we want to sell them we sell them.” Mr Dimon said. “[The plan] is basically irrelevant to JPMorgan.”
He said he believed the plan would benefit the sector but JPMorgan would not buy assets despite the generous loans offered by the governments because its executives had “learned our lesson” about borrowing from the authorities.
He also said JPMorgan would not sell troubled loans and securities to the public-private consortia either.
Analysts have said that commercial banks will be reluctant to sell assets into the government’s plan because it could force them to take further write-downs on their value.
Mr Dimon’s comments came after JPMorgan reported a 10 per cent fall in net income to $2.1bn in the first three months of the year, ahead of analysts’ expectations. JPMorgan’s shares were 2 per cent higher at $33.22 in early afternoon in New York.
The results were driven by record quarterly profits of $1.6bn in the investment banking unit, boosted by a strong performance in its trading businesses.
The bank took $10bn in charges in its mortgage and credit card portfolios and increased provisions for loan losses as its consumer and commercial banking business continued to be hit. Mr Dimon said there were “some positive signs” in the US economy but added that activity remained subdued.
The bank said its balance sheet remained strong and the integration of Washington Mutual, the stricken regional lender it acquired for a cut price last year, was on schedule.
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