Monday, June 25, 2018
Business

In wake of $2.3 billion trading loss, JPMorgan Chase's shareholder meeting in Tampa may get rowdy

"We made a terrible, egregious mistake and there's almost no excuse for it." The bank was "sloppy" and "stupid."

Jamie Dimon, chief executive of JPMorgan Chase on Sunday's Meet the Press.

• • •

JPMorgan Chase CEO Jamie Dimon will be in Tampa today to host the massive bank's potentially raucous annual shareholders meeting, complete with protesters outside and upset investors inside.

Talking point No. 1: The bank's staggering $2.3 billion trading loss revealed last week.

At the meeting and in the days that follow, how clearly and honestly Dimon can explain how one of the world's largest and most sophisticated banks got so badly burned with trading losses will go far in influencing the confidence of customers, employees and the communities where the bank operates.

The details so far about the bank's hefty loss reek of what nearly took down the financial system four years ago — trades so complicated and of such magnitude that even top-level executives can't spot the problems before they come smashing down.

Dimon, paid $23 million last year, faces several challenges.

He will have to acknowledge the seriousness of a $2.3 billion trading loss but also reassure shareholders that a bank with $2.3 trillion in assets is in no great danger. One large investor group already is calling for an overhaul of the bank's risk committee.

He will have to convince the bank's 5,000 Tampa Bay and 17,000 Florida employees that this trading loss was a fluke and that other big hits are not poised to strike the bottom line.

He will have to counter a Congress and federal regulators worried that new financial laws remain inadequate to stem high-risk trading activities that include hedging and derivatives by the biggest banks.

He will have to ease revived concerns about banks like JPMorgan Chase that remain TBTF: Too Big To Fail. Dimon's bank already has expansion plans in Florida, with 250 branches and blueprints for many more.

Through the crushing recession, a polished and at times arrogant Dimon proved the sharper risk manager and better at public relations. He outshined such diminished peers as CEO Brian Moynihan of Bank of America in Charlotte, N.C., and CEO Vikram Pandit of Citibank in New York.

Dimon's name on occasion had even popped up on lists speculating about candidates to serve as U.S. Treasury secretary. That now seems unlikely.

While three top level JPMorgan Chase executives have stepped down since the announced loss, a few voices are calling for Dimon to resign as well.

Until this trading loss, JPMorgan Chase had remained mostly unscathed by the financial chaos that required federal bailouts of so many financial institutions nationwide. Compared with the woes of Bank of America and Citibank, JPMorgan Chase's problems were minor.

The $2.3 billion loss took place in the bank's London office. That's where the sheer size of JPMorgan Chase's trading portfolio was so big, topping $350 billion, that the trader in charge of it was dubbed the "London Whale.'' Encouraged by the bank's chief investment officer in New York, his trades were supposed to shield the institution from Europe's economic turmoil. But when the markets shifted in April and early May, the hedging transactions intended to minimize bank losses in fact magnified them into a multibillion-dollar hit.

Today's meeting puts Dimon 1,126 miles away from JPMorgan Chase's headquarters in lower Manhattan where he would face both New York's financial media and the Occupy Wall Street protesters.

In Tampa, the Florida Consumer Action Network and the Occupy Tampa movement have called for a protest outside of the bank's well secured annual meeting from 10:30 in the morning until noon. It's unclear how many people will show up outside the bank's complex in an office park near Interstate 75.

Still, the event may foreshadow the bigger protests expected in late August when the Republican National Convention is held in downtown Tampa.

Dimon's bruised reputation will need some rehab.

"Mr. Dimon gets an A for moving to stem the wrath of regulators, but an F for not finding the problem in the first place," veteran bank analyst Michael Mayo at Credit Agricole Securities told the New York Times.

Average those two grades and Dimon ends up with a gentleman's C. At today's shareholder meeting, he has the chance to raise his grade or at least keep it from dropping any lower.

Contact Robert Trigaux at [email protected]

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