NEW YORK: JPMorgan could lose about US$1 billion (RM4.2 billon) on its Russia exposure, chief executive Jamie Dimon said yesterday, detailing the extent of the bank’s potential losses from the conflict in Ukraine for the first time.
In his keenly watched annual letter to shareholders, the chairman and chief executive of the biggest US bank by assets also urged the United States to increase its military presence in Europe and reiterated a call for it to develop a plan to ensure energy security for itself and its allies.
Dimon did not provide a time frame for JPMorgan’s potential Russia losses but said the bank was concerned about the secondary impact of Russia’s invasion of Ukraine on companies and countries. Russia calls its actions a “special operation”.
Global banks have detailed their exposure to Russia in recent weeks but Dimon is the most high-profile world business leader yet to comment on the broader impact of the conflict.
Dimon may continue as chairman when he eventually relinquishes his role as chief executive, the bank said yesterday.
The disclosure, in a report to shareholders ahead of JPMorgan’s annual meeting in May, said the bank had found that most major shareholders want Dimon to remain chairman.
The board also said that it was inclined as a “general policy” to separate the jobs of chairman and chief executive after Dimon is gone. Many shareholders have a general preference to separate the posts, it said.
In his letter to shareholders, Dimon addressed the relationship between the US and China and said the United States should revamp its supply chain to restrict its scope to suppliers within the US or to only include “completely friendly allies”. He urged the United States to rejoin the Trans-Pacific Partnership, one of the world’s biggest multinational trade deals.
Commenting on the macroeconomic environment, Dimon said the number of Federal Reserve interest rate increases “could be significantly higher than the market expects”. He also detailed the bank’s rising expenses, in part due to technology investments and acquisition costs.
While he wrote that he is not worried about the bank's exposure to Russia, he said the war in Ukraine will slow the global economy and will impact geopolitics for decades.
While prices and wages were rising even before the war, Russia’s invasion of its neighbour has caused a surge in energy prices, and Dimon warned in his letter to shareholders, “Along with the unpredictability of war itself and the uncertainty surrounding global commodity supply chains, this makes for a potentially explosive situation.”
The US economy remains strong and hopefully “has Covid-19 in its rearview mirror”, but competing factors facing the world’s largest economy “present completely different circumstances than what we’ve experienced in the past – and their confluence may dramatically increase the risks ahead”.
Dimon praised the Fed for making clear that it will raise interest rates as much and as fast as needed to contain inflation, while also starting to reduce its massive bond holdings.
Dimon wrote that he doesn’t envy the central bank, which “needs to deal with things it has never dealt with before (and are impossible to model)”.
On acquisitions, Dimon said that the bank will be reducing stock buybacks over the next year to meet capital increases required by federal rules “and because we have made some good acquisitions that we believe will enhance the future of our company”.
JPMorgan has been on a buying spree, spending nearly US$5 billion on acquisitions over the past 18 months. Dimon said that will increase “incremental investment expenses” by roughly US$700 million this year.
Investments in technology will add US$2 billion to expenses this year, Dimon said. – Reuters, AFP
