BP had a reputation as the “green energy” with untold tens of millions spent on commercials showcasing solar panels and geothermal turbines and god knows what else. And then just one of their rigs in one part of the world caused an oil leak, and that was the end of that reputation, probably forever.
Michael Santoli looks at what the lasting effect of JPMorgan’s shocking disclosure will really be:
How, and how much, will this hurt JPMorgan? With a $2.3 trillion balance sheet and a quarterly run rate of $6 billion in earnings, a $2 billion mark-to-market loss is easily, if uncomfortably, absorbed, as would be the additional $1 billion in potential costs now being estimated to mop up the trades. The $1.20-per-share annual dividend, the $15 billion share-buyback authorization, the bank’s nearly $5 in per-share earnings power, and its solid capital ratios look secure.
The pain is being administered to the “reputational premium” that JPMorgan, Dimon, and the company’s stock (ticker: JPM) have (justly, to date) enjoyed over megabank rivals. The narrative of Dimon as the banker who foresaw the excesses that caused the 2008 financial meltdown and girded his company for the shock is diminished slightly, but not fully undermined.
Perhaps it’s a trivial observation, but not every CEO would chastise himself and his company in quite the blunt terms Dimon did on his Thursday conference call. It’s a fair bet that the Chief Investment Office (which, as the Wall Street Journal’s Deal Journal blog noted, has grown far faster than the bank as a whole in recent years) will have its mandate sharpened, shrunken…or both.
This is key because many $JPM longs have piked the stock because of the “fortress” reputation and the halo of self-confidence that Dimon & Co were to seen to have been working under.