By Marek Fuchs
Earnings are never lock-safe. However, a reasoned observer of Wall Street behavior might guess that the alignment of JPMorgan Chase’s (JPM) first quarter earnings report and their soon-to-be-held shareholder meeting – at which its leader's fate will be sealed – means the bank should find a way, during their Friday earnings release, to jack up shareholder sentiment.
The fact that the company is headed in the right direction cannot be framed with doubt or held out as a mere abstraction. JPMorgan will find a way to throw good fortune in shareholders' faces.
The company will spend Friday on the charm offensive. Facing rebuke or vindication, JPMorgan CEO and chairman Jamie Dimon, once fawned over by presidents and Warren Buffett alike and now hanging by the veritable thread, will see to it.
That’s why you cannot unhitch Friday’s earnings from the fateful May 21 shareholder meeting. But let’s back-up for a moment.
Curse of the 'Whale'
The London Whale Trader, who cost the bank more than $6 billion, has caused a big heap of mishandled misery for Dimon. The corrosive situation moves toward near-certain resolution at the meeting in Tampa, only weeks away, in which shareholders will vote on whether to pick Dimon up by the seat of the pants and scruff of the neck and throw him out of his chairman post.
Technically speaking, Dimon would still retain his chief executive officer title but the situation would be seen as a face-slap of the highest order. Dimon would presumably resign, a starkly embarrassing end to a once-charmed existence.
Once the toast of the financial world, Dimon would just be toast.
That’s why the sweet talk has already started. Dimon is already all but genuflecting to shareholders and regulators alike. In a shareholder letter, he admitted to sins and transgressions and said he felt “terrible that we let our regulators down.”
When a Wall Street leader starts talking about his feelings, you know it’s getting serious.
Dimon also wrote: “The London Whale was the stupidest and most embarrassing situation I’ve ever been a part of.” When a Wall Street leader calls himself dumb – well, you get the picture. This sad sack routine, mind you, is coming from a guy who only last year was so tin-eared and egotistical that he sneered away the billions in losses as “a tempest in a teapot.”
We’re facing the last act of a desperate man.
Meanwhile, JPMorgan functionaries are overtly lobbying shareholders – a rare move – to go easy on Dimon.
There was a push to oust Dimon last year but – at least, comparatively – that push looks like child’s play set next to the two-handed shoving taking place now.
Earnings still looking good
Luckily for Dimon, earnings look good anyhow. The financial sector has been one of the few to see upward revisions recently. You can count Bank of America (BAC) and Goldman Sachs (GS) – along with JPMorgan – in the number of financial firms that have seen consensus estimates rise in recent months. In JPMorgan’s case, analysts have raised quarterly numbers by about a nickel in the past three months. Their 2013 full-year numbers are up by .17 cents. Analysts are now expecting about $1.39 a share on revenue of $25.94 billion. The company has beaten expectations for four consecutive quarters.
But JPMorgan won’t leave it to chance. Dimon will look for an accelerant. Look for JPM to do one or more of the following:
1) Raise numbers going forward. If there is even a metaphysical chance that business will outpace expectations, look for them to bump estimates up. Nothing puts corporate leaders in better stead with shareholders.
2) Have a good call. If the reality of their business does not allow for increased numbers, Dimon will merely drop a few well-placed superlatives about various JPMorgan business sectors. Superlatives don’t cost anything (in the short-run) and can build the needed level of support. It’s the oldest trick in the book. To gauge how hard JPMorgan is working it, compare their tone to that of Wells Fargo (WFC), which also reports on Friday but doesn’t have the same Sword of Damocles hanging over their chairman’s head.
3) Raise the dividend. This is a little complicated; the Fed gave JPMorgan a clean – if slightly hedged – bill of health on the latest stress test but shareholders already earn a 3.1% yield. Still, if the company gives, it shall receive…votes. So watch for them to try to buy votes by either raising the dividend or “subtly” hinting at a dividend increase in the not-so-distant future.
4) Announce good buyback news. See #3.
Might Dimon treat Friday’s release like any other? It’s doubtful.
It could be firing season on Wall Street, as Ron Johnson of J.C. Penney (JCP) was given the boot. And the drumbeat is loud. Even the staid New Yorker brought up the prospect that the London Whale might “swallow” Dimon whole. Once “untouchable,” they continued, “there is now no doubt that his career is on the line.”
With all respect to Dimon’s newfound "feelings," rest fairly assured that our favorite newly sensitive Wall Street titan won’t go down without clawing and scratching. Friday’s earnings can only be viewed through the lens of next month’s meeting.
Marek Fuchs was a stockbroker for Shearson Lehman Brothers before becoming a journalist who wrote The New York Times' County Lines column for six years. Fuchs speaks regularly on business and journalism issues at venues ranging from annual meetings of the Society of American Business Editors and Writers to PBS to National Public Radio. His recent book, "Local Heroes: Portraits of American Volunteer Firefighters," earned widespread praise. He is on the writing faculty at Sarah Lawrence College. When Fuchs is not writing or teaching, he serves as a volunteer firefighter. You can contact him on Twitter: @MarekFuchs.
- Investment & Company Information
- Jamie Dimon
- JPMorgan Chase