JPMorgan to buy back stock


Is JPMorgan Chase on the road back after a string of bad news, including on-going fallout from the London Whale episode and various government investigations, including one into Bear Stearns mortgage practices?

Well, the bank has won regulatory approval to buy back up to $3 billion in stock, according to a regulatory filing. Recall that in the aftermath of the London Whale "hedging fiasco," the bank halted its buyback program in May as it disclosed that the losses would be huge. Those losses ballooned out to $6 billion, triple what was originally estimated, but the bank now seems confident that the worst is over, and regulators agree in part, as they authorized the buyback.

The bank also confirmed that it was on a path toward settling two SEC investigations. This may only be the beginning of a new stock buyback program. As the company's balance sheet mends, it will likely buy back more. Reuters notes the views of analyst David George of Robert W. Baird & Co., who has told clients that he expects the buyback program could hit $12 billion next year. Can the bank afford that?

"The current dividend, which is 30 cents a share, costs the company about $4.5 billion a year. If the company were to pay out that much in dividends and spend $12 billion buying its stock, the total return of capital to shareholders of $16.5 billion would amount to about 80 percent of net income that analysts expect the company to earn in 2013," George said.

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