Fed Gives Bankers More Time to Whine
The largest banks also updated their estimates of Basel III Tier 1 common equity ratios, to conform to the Fed's proposed capital rules, which lowered the estimated ratios for most big banks. Nevertheless, the largest financial players -- including those that have plans to return significant capital to investors -- continue to express confidence that they will achieve full Basel III compliance years before the rules are fully phased in, in January 2019.
- JPMorgan Chase (JPM) estimated that under the capital rules proposed in June, the company's Basel III Tier 1 common equity ratio was 7.9% as of June 30, and would rise to 9.1% "after impact of mitigants and runoff through 2014." JPMorgan Chase's fully phased-in Tier 1 common equity ratio requirement will be 7.0%, plus an additional buffer of up to 2.5%, at the end of 2018. The Federal Reserve in March approved a plan by JPMorgan to increase its quarterly dividend by a nickel a share to 30 cents, along with $12 billion in common share repurchases s during 2012, followed by another $3 billion in buybacks during the first quarter of 2013. While JPMorgan CEO James Dimon suspended the buyback in May program after disclosing the company's hedge trading losses, when the company on July 13 reported a second-quarter profit of $5 billion -- even after absorbing $4.4 billion in trading losses -- Dimon said "hopefully, if all goes well, we can start buying back stock early in the fourth quarter."
- Bank of America (BAC) estimated that as of June 30 its Tier 1 common equity ratio was 8.1%, "on a fully phased-in basis." CFO Bruce Thompson said during the company's earnings conference call on July 18 that the company had "estimated we would be in excess of 7.5% under Basel III at the end of the year; so based on where we came at out at the end of the quarter we are quite pleased with the progress we have made so far." CEO Brian Moynihan said that "we continue to make strong progress and feel good about where we stand, especially in light of our Basel III guidance.