JPMorgan stock is too expensive

Jamie Dimon thinks about stocks JPMorgan Chase are expensive.

That was the message the bank’s longtime CEO gave to analysts Monday at JPMorgan’s annual investor meeting. When Dimon was questioned about the timing of a possible boost to the bank’s share buyback program, he didn’t mince words.

“I want to make it very clear, OK? We’re not going to buy back a lot of shares at these prices,” Dimon said.

JPMorgan, the largest U.S. bank by assets, saw its shares rise 40% over the past year, hitting a 52-week high of $205.88 on Monday before Dimon’s comments roiled the stock. This twelve-month performance outpaces other banks, especially smaller companies recovering from the 2023 regional banking crisis.

It also makes the stock relatively pricey as measured by price versus tangible book value, a commonly used metric in the industry. JPMorgan shares recently traded for about 2.4 times book value.

“Buying back shares of a financial company that are much more than twice its tangible book is a mistake,” Dimon said. “We’re not going to do it.”

Dimon’s comments about his company’s stock, as well as the acknowledgment that he may be close to retirement, sent the bank’s shares down 4.5% on Monday.

To be clear, JPMorgan repurchased its shares under a previously approved buyback plan. The bank resumed buybacks early last year take a break to build capital according to new expected guidelines.

Dimon’s guidance simply means the program is unlikely to gain momentum anytime soon. JPMorgan will likely buy shares for a quarterly amount of $2 billion to $2.5 billion, Portales Partners analyst Charles Peabody wrote in a March research note.

JPMorgan’s CEO has often resisted pressure from investors and analysts he considered short-sighted. When interest rates were low, Dimon held a relatively large amount of cash, instead of putting money into low-interest, long-term bonds. That helped JPMorgan outperform other lenders, including bank of Americawhen interest rates skyrocketed.

Dimon’s desire to save cash doesn’t just stem from the impending capital regulations. On Monday, he said several times that he was “cautiously pessimistic” about economic risks, including those related to inflation, interest rates, geopolitics and the reversal of the Federal Reserve’s bond-buying program.

The markets are currently underestimating these risks, Dimon said. For example, the prices of high-quality corporate bonds do not adequately reflect the potential for financial stress, Dimon said.

“The investment grade credit spread, which is near the lowest it has ever been, will be completely wrong,” Dimon said. “It’s just a matter of time.”

Since 2022, Dimon has been warning of an economic ‘hurricane’ caused by geopolitical risks and quantitative tightening. While the continued strength of the economy has surprised many on Wall Street, including Dimon, his concerns have since influenced his decision-making process.

“We’ve been very, very consistent: If stocks go up, we’ll buy less,” he said Monday. “When the time comes, we will buy more.”