Wednesday, January 16, 2013


JPM CEO takes 50% pay cut.
2012 compensation:  only $11.5 million.
Poor baby.

This morning JP Morgan Chase & Co.'s Board of Directors announced that its Chairman and CEO, Jamie Dimon, would get a bonus of only $10 million for his performance in 2012.  Dimon is being held accountable for over $6 billion in losses incurred by the firm's chief investment office when it bet heavily on risky derivatives (internal report here).  The announcement comes two days after sanctions imposed on the bank by the Office of the Comptroller of the Currency and the Federal Reserve for deficiencies in its risk-management practices.  As other U.S. and British regulators are investigating the infamous "London Whale" trade, further enforcement actions may be coming.  The OCC also issued a cease-and-desist order for failure to comply with the Bank Secrecy Act.  Indeed, some suggest that Dimon deserves jail time for money-laundering.

Meanwhile, JP Morgan Chase just reported a record profit for the fourth quarter.  Adding to net income was the release of almost $900 million in loan-loss reserves.  Curiously, as page 22 of the earnings presentation (PDF) shows, the company has drawn off $5.673 billion from loan-loss reserves in the past year (boosting profits) even as the total value of non-performing loans has increased by $727 million over the same period.  So Jamie's latest bet is this:  a mending economy will cure some of these bad loans.

Page 15 shows the same shrinking interest margins observed last week with Wells Fargo (see chart below).  The company bemoans lower yields on loans, lower yields on investment securities, and "limited reinvestment opportunities," which may explain why the CIO was reaching for reward last year.  The Fed's zero interest-rate policy (ZIRP) makes it hard for an honest banker to earn a living.  Really, who can live on a measly eleven-point-five mill these days?

[click to enlarge]

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