Trading Loss Haunts Dimon at JPMorgan Chase's Annual Meeting

Annual investor meetings usually begin with management recapping a company’s financial and operational state. At this morning’s JPMorgan Chase (JPM) annual meeting in Tampa, Chief Executive Officer Jamie Dimon wasted no time before addressing the elephant in the room. “I want to start with what is probably on your mind,” Dimon said, launching into brief remarks about the bank’s $2 billion loss on a derivatives bet gone awry.

Calling the bet “poorly vetted and poorly executed,” as he has done for days, Dimon said the bank had many lessons to learn from it. He praised Ina Drew, a 30-year staff veteran who ran the chief investment office until announcing her retirement on May 14. He said a change in management was necessary in light of the office’s loss and added that the bank has appointed an executive to work full-time on investigating the lapse. Then Dimon tried to get back to regular business, reading a statement about the highlights of JPMorgan’s different business units. “Each of our businesses are among the best in the world,” he told shareholders, saying the bank will be stronger and more profitable in the future.

The loss continued to charge the meeting. Several investors who presented shareholder proposals mentioned it. When a clergy member representing the Board of Pensions of the Presbyterian Church submitted a proposal to improve the bank’s mortgage servicing, he said the loss from the derivatives trade “pales in comparison” to the losses shareholders and homeowners suffered from faulty mortgage servicing. He said the bank failed to help struggling borrowers stay in their homes and created unfair foreclosures. Others cited the big loss in contending that JPMorgan’s board should be more independent; they said Dimon should not serve as both chairman and CEO and that JPMorgan should limit its political lobbying and donations.

The trading setback came up repeatedly during the Q&A portion of the meeting. Citing Dimon’s assurances that the bank could handle a $2 billion loss, one shareholder asked why the bank wasn’t devoting that kind of money to reducing the principal on troubled mortgages. Touching on a topic dear to investors’ hearts, a shareholder from Kentucky asked if the loss would cause Chase to cut its dividend. “I certainly hope not,” Dimon replied. “The company is strong, sound, profitable.”

Another shareholder suggested that the derivatives losses present an opportunity for the bank to drop its anti-reform crusade and instead support meaningful financial regulations. “You are lobbying against a strong and meaningful Volker Rule and a strong Consumer Financial Protection Bureau,” the investor said. “It’s a benefit for Chase to really have rules that will create a level playing field.”

In the middle of the Q&A session, which lasted about half an hour, a Tampa shareholder gave Dimon a vote of confidence. “We think you are doing a fabulous job,” he said. The audience responded with tepid applause.

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European Stocks Gain This Week, Pare First Annual Loss Since ’08

January 02, 2012, 2:39 AM EST By Adam Haigh

Dec. 31 (Bloomberg) -- European stocks climbed in the last week of 2011 as U.S. data showed the recovery in the world’s largest economy is gathering pace and optimism grew that euro- area policy makers will contain the debt crisis.

Banco Comercial Portugues SA and Banco Espirito Santo SA, Portugal’s largest lenders, jumped more than 15 percent after a report that the government may recapitalize the banks without becoming a shareholder. Britvic Plc led food and beverage producers higher, extending this year’s gains for the industry.

The benchmark Stoxx Europe 600 Index rose 1.1 percent to 244.54, the highest since Oct. 28. The second-straight week of gains helped trim this year’s losses to 11 percent. The gauge has rallied 14 percent from this year’s low on Sept. 22 as euro- area leaders planned to channel central-bank loans through International Monetary Fund to debt-ridden nations and the European Central Bank took steps to ease a cash squeeze.

“There is a risk of losing sight that gradually progress has been made,” said William De Vijlder, who oversees $778 billion as the global chief investment officer of Paris-based BNP Paribas Investment Partners. “The ECB has eased its policy. The firepower of the IMF is being increased.”

Reports this week showed business activity in the U.S. expanded more than forecast and confidence among American consumers rose in December to the highest level in eight months.

Dwindling Volumes

Post-Christmas trading was slow, with daily volume in the Stoxx 600 this week dipping to 32 percent of this year’s average, according to data compiled by Bloomberg.

The Stoxx 600 gained 5.6 percent from the start of the year to its peak on Feb. 17. From there, the index tumbled 26 percent to its low on Sept. 22, entering a bear market. The gauge had its worst third quarter since 2002, dropping 17 percent, as U.S. leaders wrangled over deficit cuts and European policy makers remained divided on their response to the debt crisis.

An Oct. 26 agreement to bolster the region’s bailout fund, the European Financial Stability Facility, stalled as Germany and France differed over how tackle the crisis. France called for using the ECB as a backstop, while Germany rejected it. Chancellor Angela Merkel listed using the ECB as the lender of last resort, issuing joint euro-area bonds and going in for a “snappy debt cut” as unworkable proposals.

Lenders Lead Losses

Banks had the biggest drop among 19 industry groups this year, sinking 32 percent, amid growing concern that the fiscal crisis will force at least one nation to default on its debt. Health-care and food stocks advanced as investors sought companies whose earnings are less tied to economic growth.

The decline in European equities compares with an 17 percent tumble in the MSCI Asia Pacific Index and a 0.4 percent gain in the S&P 500 at the close on Dec. 29.

Banco Comercial Portugues advanced 16 percent to a two- month high. Chinese banks may be interested in investing in the lender, news agency Lusa reported citing Cao Guangjing, chairman of China Three Gorges Corp.

Banco Espirito Santo rose 15 percent. Portugal may recapitalize the country’s banks without becoming a shareholder, Jornal de Negocios reported, without saying where it got the information. The state may subscribe contingent convertible bonds sold by the banks, the newspaper said. So-called CoCos are bonds that convert into equity if a bank’s capital drops below a set level.

Britvic rallied 4.7 percent. Unilever climbed 1.6 percent. Nestle SA added 1.5 percent.

Rio Tinto Group declined 1 percent, as copper slid on the London Metal Exchange this week.

--With assistance from Adria Cimino in Paris. Editors: Srinivasan Sivabalan, Andrew Rummer

To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net

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Dimon’s Annual Meeting Brings Apologies, Protesters on Mortgages

May 17, 2011, 2:45 PM EDT By Dawn Kopecki

May 17 (Bloomberg) -- Jamie Dimon, JPMorgan Chase & Co.’s chairman and chief executive officer, said he was sorry for foreclosure mistakes as hundreds of protesters at the annual meeting demanded he do more to help homeowners and small businesses recover from the financial crisis.

For any errors that were made, “we deeply apologize,” Dimon, 55, said today at the shareholders’ meeting in a 2- million-square-foot office building in Columbus, Ohio. “We are doing everything we can to keep people in their homes that should stay in their homes.” Dimon said he especially regretted the bank’s mistakes in foreclosing on active-duty military personnel and for fumbling paperwork on other home seizures.

JPMorgan and other large U.S. banks are feeling the backlash from the housing bust, with mortgage losses and related litigation suppressing earnings and regulators investigating industry practices. The U.S. Justice Department is suing Deutsche Bank AG for more than $1 billion, and has said it may go after other lenders for filing false claims for federal mortgage insurance on faulty loans.

JPMorgan’s record $5.56 billion in profit during the first quarter was tempered by “extraordinarily high losses we still are bearing on mortgage-related issues,” Dimon said last month. JPMorgan’s $17.4 billion in net income last year made it the most profitable bank in the U.S.

“Everyone is hurting, it seems like, except for Wall Street and its executives,” said Jordan Estevao, who helped lead demonstrations outside the meeting for National People’s Action, a non-profit consumer advocacy group.

One Arrest

Protest organizers said about 850 attended, while the bank put the figure at 350. Attendees were screened at four security check points to get into the meeting.

Robin Acree, a 50-year-old community activist from Mexico, Missouri, said police sprayed her with mace while she was protesting outside the facility.

“So many of our folks are getting screwed by these big banks,” Acree said. “A lot of people are angry. I’m angry. We see economic stress on our families, no jobs and foreclosures.”

Protesters shouted “No more diamonds for Dimon” and other slogans, and one was arrested, according to the advocacy group.

“They’re not doing their part to aid a recovery,” Estevao said in an interview yesterday. “Instead they are lining their pockets. They’re making massive profits, still giving themselves massive bonuses and doing too little to help spur recovery for the rest of America.”

Bank of America

Fourteen of the largest mortgage servicers, including JPMorgan and Bank of America Corp., the biggest U.S. bank by assets, signed an agreement in April with the Federal Reserve, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency to refund costs to homeowners for foreclosures that were mishandled and to overhaul procedures for seizing homes.

JPMorgan took a $1.1 billion charge in the first quarter and may add as many as 3,000 employees to comply with the consent decree. The Department of Housing and Urban Development, Federal Housing Finance Agency and state attorneys general also are investigating the industry’s foreclosure practices.

General Counsel Stephen Cutler said at the meeting that the bank’s litigation costs were higher than expected in “every area.” He said expenses for outside legal advice last year were more than $700 million.

JPMorgan agreed in April to pay $56 million to settle claims that it overcharged military personnel on their mortgages. Dimon has previously apologized, saying the bank erred in handling certain mortgages covered by the Servicemembers Civil Relief Act.

Military Foreclosures

Cutler said the bank mistakenly foreclosed on 27 active- duty military personnel who were protected by the law. JPMorgan is “making amends on every single one of those” by either paying off their mortgages or giving them their houses back for free, he said.

Dimon said the military foreclosures were the worst mistake the bank has ever made.

“We deeply apologize to the military, the veterans, anyone who’s ever served this country and we’re trying to go way beyond,” he said. “We’re sorry,” he added, drawing a round of applause.

A shareholder proposal requiring the bank to adopt and disclose uniform foreclosure policies failed with 6.4 percent of the vote. None of the other investor proposals were approved either, with one to allow shareholder action by written consent winning the most support with 48.99 percent of the vote.

Investors also re-elected JPMorgan’s board of directors and reappointed PricewaterhouseCoopers as its auditor.

--Editors: Steve Dickson, William Ahearn

To contact the reporter on this story: Dawn Kopecki in Columbus at dkopecki@bloomberg.com.

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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