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Jan 22, 2021

Jamie Dimon's best deal would be more JPMorgan stock, Mayo says

U.S. Banks to Benefit From 'Peace Dividend': Analyst Mayo

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Jamie Dimon has made no secret about his hunt for acquisitions, stirring all kinds of speculation about what deals may be in the works for JPMorgan Chase & Co. The best thing might be if the bank simply bought more of its own stock, Wells Fargo bank analyst Mike Mayo says.

“JPMorgan should top JPMorgan’s shopping list,” Mayo said in a phone interview. He pointed out that the bank has some US$30 billion in excess capital -- and warned its chief executive officer not to let that “burn a hole in your pocket.”

The bank’s fourth-quarter results showed “best-in-class performance,” and it shouldn’t buy something that won’t get as good a return as its own shares, Mayo said. Plus, asset-management deals are often costly as buyers pay for the business and for talent, making it best for JPMorgan “to keep doing what it’s doing,” he said.

JPMorgan has rallied 5.4 per cent so far this year, more than twice the S&P 500’s gain.

Others have cast their eyes in different directions.

On Tuesday, Odeon’s Dick Bove said he felt “reasonably certain” JPMorgan was poised to buy a large non-bank, citing a vigorous discussion about competitive threats during last week’s earnings call. Urging investors to open their horizons about what the bank might buy, he suggested Target Corp. or even Twitter Inc. Speculation about JPMorgan’s desire for an asset manager, with DealReporter calling Invesco Ltd. a “potential partner,” lifted Invesco shares on Wednesday.

JPMorgan was said to have lost out to Morgan Stanley in its US$7 billion bid for asset manager Eaton Vance Corp., according to the Financial Times. Morgan Stanley has also purchased E*Trade Financial Corp. Morgan Stanley shares have advanced 7.8 per cent this year.

A JPMorgan representative declined to comment.

Earlier this month, JPMorgan said it could buy back as much as US$4.5 billion of shares this quarter after the Federal Reserve lifted an industry ban on repurchases. At that time, Dimon said he “would love to spend more on investments,” which would be the “best and highest possible use of our capital.”

 

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