Bad Timing: JP Morgan Halts Buybacks

JP Morgan CEO Jamie Dimon announced that his embattled bank is halting its daily stock repurchase plan at an investor conference in New York on Monday. Dimon said that the move was designed to increase capital levels to "what we think our Basel III target will be," and not a result of trading losses at the firm. The executive said that he plans on restarting the buybacks, but he did not elaborate on what the timetable might be. The timing of the buyback halt is less than optimal for JP Morgan shareholders. The stock has fallen more than 18% since the bank disclosed multi-billion dollar losses within its Chief Investment Office, a segment of JP Morgan that is tasked with investing excess cash. If there was a silver lining in the falling stock price, it was that the bank could aggressively buy back shares at the lower prices, thereby rewarding shareholders. Unfortunately, with today's announcement, that will no longer be taking place in the near-term. The losses within the CIO's $350 billion portfolio came as a result of massive bets made in credit default swaps. A London-based trader had been betting that corporate credit quality would improve, and when those positions turned south, the bank racked up substantial losses in a short period of time. While losses have reportedly continued to mount as a result of the wrong-way bets, Dimon remains confident. He said, “There's no outcome that will be a disaster for this company. I am not sitting here worried about the ultimate loss on this thing.” He also called the losses an "isolated event." Despite Mr. Dimon's optimistic outlook, the entire debacle has seriously damaged his credibility and saddled plenty of investors with sizable losses of their own as a result of the plunging stock price. On Monday, JPM shares had lost another 3.05% to $32.47 despite a strong broader market rally.