J.P. Morgan Chase & Co said US regulators have approved a plan for the bank to use its capital to buy back as much as $3 billion of its stock in the first quarter of 2013. The company also disclosed that it has reached "an agreement in principle" with the Securities and Exchange Commission to resolve two previously-disclosed investigations related to mortgage-backed securities.
J.P. Morgan had suspended buybacks in May and submitted a new capital plan to the Federal Reserve in August after containing its "London Whale" derivatives losses at about $6.2 billion. The Federal Reserve told the bank on November 5 that it had approved the plan, J.P. Morgan said in a quarterly filing to the Securities and Exchange Commission on Thursday.
The losing derivatives positions were disclosed by J.P. Morgan on May 10, more than a month after reports surfaced in the credit markets that Bruno Iksil, a London-based trader for J.P. Morgan known as the London Whale, had made massive bets in credit markets. The approved plan provides for J.P. Morgan to continue paying its current quarterly dividend on common stock, the filing said.
CEO Jamie Dimon told investors on May 21 the bank had suspended repurchases of its stock to rebuild its capital and meet higher requirements for financial safety. Under restrictions imposed after the financial crisis, J.P. Morgan and other big banks cannot buy back stock or increase their dividends without approval from the Federal Reserve.
Dimon had said in early April that he could boost shareholder value by buying back stock for as much as $45 a share. J.P. Morgan spent $9 billion in 2011 to buy back its shares. In premarket trading on the New York Stock Exchange, J.P. Morgan shares were up 1.4 percent at $41.04.
The company did not provide an estimate of how much the settlements with the SEC over mortgage securities could cost. One of the cases stems from disclosures by J.P. Morgan of delinquencies involving one mortgage-backed securitization. The other case is over multiple securitizations by Bear Stearns, the failed investment bank that J.P. Morgan took over in March 2008 in the financial crisis.
In the filing, J.P. Morgan raised its estimate of how much litigation could cost the firm above its legal reserves to $6 billion from $5.3 billion disclosed three months ago. The company also said it is "in the early stages" of counting the potential impact of Hurricane Sandy hitting the East Coast on October 29. The bank has waived some checking account and loan fees for late payments. The total financial cost of Sandy to the bank will depend in part on the losses its borrowers suffer after collecting insurance proceeds and government assistance, the filing said.
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