JP Morgan can start buybacks post Whale loss

City A.M. Reporter
JP MORGAN Chase & Co revealed yesterday that US regulators have approved a plan for the bank to use its capital to buy back as much as $3bn (£1.87bn) of its stock in the first quarter of 2013.

The company also disclosed that it has reached “an agreement in principle” with the Securities and Exchange Commission (SEC) to resolve two previously-disclosed investigations related to mortgage-backed securities.

JP Morgan had suspended buybacks in May and submitted a new capital plan to the Federal Reserve in August after containing its London Whale derivatives losses at about $6.2bn.

The Fed told the bank on 5 November that it had approved the plan, JP Morgan said in a quarterly filing to the Securities and Exchange Commission.

The losing derivatives positions were disclosed by JP Morgan on 10 May, more than a month after reports surfaced in the credit markets that Bruno Iksil, a London-based trader for JP Morgan known as the London Whale, had made massive bets in credit markets.

The approved plan provides for JP Morgan to continue paying its current quarterly dividend on common stock, the filing said.

Chief executive Jamie Dimon told investors on 21 May the bank had suspended repurchases of its stock to rebuild its capital and meet higher requirements for financial safety.

Under restrictions imposed after the financial crisis, JP Morgan and other big banks cannot buy back stock or increase their dividends without approval from the Federal Reserve.

The company did not provide an estimate of how much the settlements with the SEC over mortgage securities could cost.