JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon has the experience needed to manage the fallout from trading losses, and market disruptions haven’t been serious, Bank of America Corp. CEO Brian T. Moynihan said today.
Trading didn’t freeze and markets behaved “reasonably well” given the circumstances after Dimon disclosed at least $2 billion in trading losses at JPMorgan’s chief investment office, Moynihan said today at a Manhattan investor conference. Dimon has shown he’s got the skills to handle the affair, said Moynihan, whose Charlotte, North Carolina-based bank ranks second by assets behind New York-based JPMorgan.
“He’ll manage through it and do what he needs to do for the company,” Moynihan, 52, said of Dimon, 56. “It has caused great concern in the markets, but I don’t think it has disrupted the markets.”
Moynihan has disclosed plans to trim as much as $8 billion from expenses and announced 30,000 job cuts last year to boost profit and restore capital. His turnaround efforts have been overshadowed as investors focused on trading losses at JPMorgan. While damage may expand, Dimon told the audience earlier he’s not worried about the ultimate size of the loss and that “there’s no outcome that will be a disaster.”
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Markets haven’t “shut down” as some did in response to global turmoil such as the Greek debt crisis or last year’s debate to raise the U.S. debt ceiling, Moynihan said.
“That doesn’t mean it can’t happen but it hasn’t happened yet,” Moynihan said, in answering a question about whether JPMorgan’s efforts to end its money-losing trade may roil markets. Bank of America has become a safer bank after it trimmed or closed units to take risk out of the firm, he said.
Bank of America dropped 2.7 percent to $6.83 at 4 p.m. in New York, leaving it up 23 percent this year, the most in the Dow Jones Industrial Average. The stock fell 58 percent in 2011.
JPMorgan is under pressure from investors and regulators to explain how the chief investment office, which is assigned to manage excess cash while minimizing risk, made wrong-way bets on illiquid credit derivatives, some of them so large that they distorted market prices. Even if the loss gets bigger, the affair is an “isolated event” and the ensuing investigations aren’t likely to find any big surprises, Dimon said.
JPMorgan is in no rush to unwind its holdings, even if adverse market moves produce bigger losses in the short term, Dimon said.
“Do we worry about it? 100 percent,” Moynihan said. “Do we worry about it all the time? Absolutely. Do we have lots of people worrying about it for us? Yes, but the answer is the markets have behaved reasonably well.”
Bank of America has finished work on Phase 2 of its cost-cutting program, dubbed Project New BAC, which concerns reductions at the investment banking and trading subsidiaries run by Thomas Montag, Moynihan said. While he didn’t formally announce reductions in those operations yet, they’ll be spread among junior and senior employees, a person with knowledge of the matter has said. The first phase of Project New BAC focused on retail and technology.
In March, Bank of America cut debt and equity traders and salespeople, including more than half a dozen in mortgages. The entire bank had 278,688 full-time workers as of March 31.
Moynihan has said he’s counting on trading units to help revive income at the lender, whose consumer operations have been hobbled by more than $40 billion of expenses tied to faulty mortgages. Montag’s subsidiaries swung to a profit in the first quarter, with positive trading revenue every day.