The USA30 [Dow Jones] dropped 300 points yesterday with JPMorgan a big loser.
USA30 recovered slightly in the day and finished "only" 180 points downpoints yesterday, but this brings the total to 700 points lost since the beginning of the year. As one of the largest companies on the industrials exchange, JPMorgan felt its shares fall from opening levels of 60.57 to 58.36 in the day. Since the new year, shares have dropped from 62.92.
With the loss of 2.59 percent yesterday, JPMorgan are feeling the effects of the recent regulation issued by the FED regarding capital surcharge on US banks. Under the new law JPMorgan will have to raise $20 billion in additional capital to cover losses and avoid any bailouts that the taxpayer may have to pay. This will have subsequent effects on profit and returns on equity, two major factors in investors’ decision making.
Third quarter earnings released in October 2014 showed strong results across the four different banking sectors, giving profits of $5.6 billion compared with a net loss of $0.4 billion in Q3 2013, and revenue was up by 5% compared with the prior year. However the four sectors are not actually separated and the capital charge will need to be paid on the complete assets. A recent report by Goldman Sachs suggested a future split: “Our analysis suggests that a breakup — into two or four parts — could unlock value in most scenarios, although the range of outcomes we assessed is wide, at 5-25% potential upside.”
But CEO Jamie Dimon has no plans to dissect JPMorgan and so the fees for the capital surcharge, and legal costs totaling $100 million in this week’s settlement in the case of price manipulation of FX markets, will be met from the complete balance sheet of the bank.
MT4 chart: JPMorgan
MT4 chart: USA30
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