JPMorgan Chase disclosed on Thursday that it had received the green light from regulators to buy back as much as $3 billion of its stock in the first quarter of next year, another sign that the nation's largest bank is moving beyond a multibillion dollar trading loss it suffered on a soured derivatives bet.
In May, after first disclosing the trading losses, JPMorgan ceased stock buybacks and gave a revamped plan for its capital to the Federal Reserve in August. The central bank approved the new capital plan on Monday, according to JPMorgan's quarterly filing with the Securities and Exchange Commission on Thursday.
The trading losses, which occurred out of the bank's chief investment office, were a rare misstep for Jamie Dimon, its outspoken chief executive. After successfully steering the bank through the roughest straits of the financial crisis of 2008, Mr. Dimon had gained a reputation as a keen manager of risk. That reputation was undercut after the losse s, which stand at $6.2 billion, were first announced in May.
Since then, JPMorgan has undertaken some organization acrobatics, shuffling its top executives and moving to claw back millions of dollars in compensation from the traders at the center of the bungled bets.
The stock buyback approval will enable the bank to get back on track toward an ambitious plan to improve shareholder value. Ahead of the trading losses, Mr. Dimon promoted his plans to buy back the company's stock. Last year, the bank repurchased $9 billion of its shares.
In March, after handily passing the Fed Reserve's stress test, Mr. Dimon announced plans to increase its dividend payments and buy back at least $15 billion worth of stock through 2013. In a brash move, he barreled ahead of regulators and told investors two days before the Fed had planned to announce the results of the stress test.
JPMorgan also signaled in its quarterly filing that its litigation costs could swell and r aised its reserves for legal expenses to $6 billion from the $5.3 billion it had disclosed earlier.
And the bank disclosed that it had come to “an agreement in principle†with the Securities and Exchange Commission to wrap up two investigations into its mortgage backed securities business. Still, other potential legal headaches remain.
JPMorgan is contending with a lawsuit against Bear Stearns, the troubled unit it acquired in the 2008 financial crisis. In its first salvo against a large bank, the federal mortgage task force, co-headed by New York attorney general, Eric T. Schneiderman, sued Bear Stearns and its lending unit, accusing it of swindling investors who bought mortgage-backed securities during the heady days of the housing boom.
And federal authorities are building criminal cases related to the trading loss, scrutinizing taped calls in which bank employees discussed how to value the botched bets.
