Dimon to get pay cut after JPMorgan trading loss
FILE - In this May 11, 2012 file photo, people stand in the lobby of JPMorgan Chase headquarters in New York. JPMorgan Chase reported a 55 percent jump in earnings for the last three months of 2012 as mortgage fees and other income surged. (AP Photo/Mark Lennihan, File)
NEW YORK, N.Y. - JPMorgan Chase reported a 55 per cent jump in earnings for the last three months of 2012 as mortgage fees and other income surged. The bank also released internal reviews of a surprise $6 billion trading loss that has drawn sanctions from regulators, and it said it would cut its CEO's pay as a result.
JPMorgan, the biggest U.S. bank by assets, will pay Jamie Dimon $11.5 million for 2012, consisting of $1.5 million in salary and restricted stock awards of $10 million. That's less than half what he made last year, $23 million, which made him the highest-paid chief executive of any of the country's mega-banks.
On Monday, the bank was ordered by federal regulators to take steps to correct poor risk management that led to the surprise trading loss last year, which was related to complex bets on fixed-income investments that went wrong. JPMorgan was also cited for lapses in oversight that could allow the bank to be used for money laundering.
The bank's board of directors, explaining its decision to cut Dimon's pay, concluded that the losses were "a serious mistake." The board also praised Dimon for his response to the problem, which included reorganizing lines of business, shuttering the division that was responsible and getting rid of top managers.
"Importantly, once Mr. Dimon became aware of the seriousness of the issues presented by the CIO, he responded forcefully by directing a thorough review and an extensive program of remediation," the bank said. The CIO is the Chief Investment Office, the unit where the bets that led to the loss were made.
The bank's board of directors criticized the CIO's former leaders, saying they did not keep the board informed of potential problems and had used unapproved models for calculating risk. When The Wall Street Journal first reported the losses, bank executives dismissed it, saying it was "based on an inaccurate market perception that the portfolio was unhedged," or not protected against loss, according to the board.
The trading loss could bring even more regulatory headaches. The bank has said it has received requests for information related to government inquiries and investigations by Congress, the Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the U.K. Financial Services Authority, the state of Massachusetts and others. The bank said it is co-operating with these investigations.
Fourth-quarter earnings shot up 55 per cent over the year. The bank made $5.3 billion after paying preferred dividends, compared with $3.4 billion this time a year ago.
Per share, those earnings amounted to $1.40, blowing away the $1.16 expected by analysts polled by FactSet.
Revenue also beat Wall Street's forecasts, rising 10 per cent to $24.4 billion, after stripping out an accounting charge. Mortgage originations jumped 33 per cent.
The stock fell 45 cents to $45.90 in pre-market trading.