J.P. Morgan Makes a Profit / Cuts Dividend
Kurt Brouwer February 24th, 2009
Though they are still somewhat rare, there are signs of progress in major U.S. banks. In this case, J.P. Morgan Chase & Co. announced a major dividend cut, which will save the bank billions in cash. At the same time, it pointed out that it was profitable so far this year.
J.P. Morgan cuts dividend to save $5 billion a year (MarketWatch, February 24, 2009, Alistair Barr)
J.P. Morgan Chase & Co. slashed its quarterly dividend late Monday to save $5 billion a year and said that its first-quarter has been “solidly profitable” so far.
Shares of the giant bank climbed 4.7% to $20.42 during after-hours trading. The stock closed down 2% at $19.51 during regular trading.
The quarterly dividend will be 5 cents a share in future, down from 38 cents. That will help J.P. Morgan retain $5 billion in common equity a year, bolstering its financial strength in case the recession is longer and deeper than expected.
…Dimon pointed out that J.P. Morgan has been “solidly profitable” so far this year, even after adding significantly to reserves. The outlook for first-quarter results is “roughly” in line with analysts’ forecasts, according to the company.
J.P. Morgan’s investment bank has generated “very good” trading results so far in the first quarter, Dimon said during a conference call with analysts. Credit costs and write-downs of roughly $2 billion are possible during the period, a presentation by the bank stated.
The decision to slash the dividend wasn’t directly related to the Troubled Asset Relief Program, in which the Treasury Department invested $25 billion in preferred securities issued by the bank last year.
However, retaining $5 billion in common equity capital a year will help J.P. Morgan repay the government “as soon as is prudent,” the bank said…
I tend to be very skeptical about bank pronouncement these days. Nonetheless, I consider this a good move by J.P. Morgan and a return to actual profitable business would be welcome indeed.
Hat tip: Barry Ritholtz
- Business , Economy , Investing , Personal Finance
- Comments(0)
Did you enjoy this article?
