JPMorgan Considers Decreasing Buybacks As Shares Rise
JPMorgan has been funneling its profits into buying back shares. The benefit of this practice is that share count reduces and as a result the profit per share increases without having to increase the profit itself. However, as this occurs, the price of a share may increase, making the practice too expensive.
Jennifer Piepszak has confirmed that the bank will work to look at other investment opportunities should share prices continue to rise.
Additionally, some investors are worried at a slowdown in repurchasing, particularly because banks in general are expected to experience a decline in profits. The decline in profits would be a result of lower interest rates.
“There are a couple headwinds, and one of them is the expectation the buyback starts to decline,” said D.A. Davidson & Co. analyst David Konrad.
Repurchasing shares has proved to be a good move for JPMorgan. Since it has increased its number in buybacks, JPMorgan has bought back $59.5 billion in shares. Those shares are now valued at $75 billion.
Buybacks have been a focus of presidential campaigns as well, with both Bernie Sanders and Elizabeth Warren expressing interest in limiting the amount that banks can buy back.
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