JP Morgan Chase’s boss Jamie Dimon has said the Wall Street giant could suspend its dividend for the first time in history and that he foresees a “bad recession” for the US economy amid the coronavirus pandemic.
Dimon also warned shareholders in his annual letter that the bank’s profit will be down “meaningfully in 2020”.
JP Morgan is the first major US bank to suggest that it may have to suspend its dividend due to the coronavirus slowdown.
UK lenders, under pressure from the Bank of England, have suspended theirs and promised to halt share buy-backs. US banks have paused buy-backs but have defended paying out dividends.
Dimon said JP Morgan would consider cutting its dividend if US GDP fell as much as 35 per cent in the second quarter and unemployment rose to as much as 14 per cent. He said such a situation is unlikely, however.
The US economy is set to contract sharply as lockdown measures cause businesses to close and demand to slump. Bank of America predicts a 30 per cent fall in GDP in the second quarter. Morgan Stanley analysts have said it could fall by 38 per cent.
Dimon said: “If the board suspended the dividend, it would be out of extreme prudence and based upon continued uncertainty over what the next few years will bring.”
It would be the first time ever JP Morgan has suspended its dividend payments. It even continued paying out during the 2008/9 financial crisis.
Dimon, who returned to work last week after heart surgery, said JP Morgan was feeling the pinch in certain areas. He said local restrictions had caused many of its call centres to shut down, for instance.
He also took a dig at regulators – a theme of his annual letter to shareholders. “After the crisis subsides (and it will), our country should thoroughly review all aspects of our preparedness and response,” he said.