Dimon Avoiding Davos Limelight After $23 Billion In Fines
Jamie Dimon was right. Speaking at a televised session during the World Economic Forum in Davos last year, the JPMorgan Chase & Co. chief executive officer predicted that the condemnation of bankers was far from over.
This year, Dimon returns to the Swiss Alpine resort with no public appearances scheduled as head of a bank that agreed to pay more than $23 billion in the past 12 months in fines and settlements. He'll be joined by the leaders of other Western lenders that have been beset by record legal costs, fresh allegations of wrongdoing and lower profits.
Trust is on the agenda in Davos, along with market safety, as financiers gather after a bruising year of punishment and tougher regulation designed to avert another blowup. Those have eaten into profits and promise more pain. Anshu Jain, co-CEO of Deutsche Bank AG, Germany's biggest lender, will talk about rebuilding Europe's banks, a project whose success rests on greater scrutiny by the region's new supervisor.
"Some banks are too weakly capitalized and potentially insolvent, and the system remains dysfunctional and continues to be reckless," said Anat Admati, a Stanford University finance professor and author of "The Bankers' New Clothes: What's Wrong with Banking" who's moderating the safety panel.
A year ago, Dimon, 57, took center stage at an hourlong debate, defending banks from blame for the financial crisis and arguing that regulators were "trying to do too much, too fast." Since then, JPMorgan has settled claims involving mortgage-bond sales, lax oversight and turning a blind eye to Bernard Madoff's Ponzi scheme. Legal costs led to the company's first quarterly loss under Dimon last year and helped drive down net income 16 percent.
Investigations and lawsuits may preoccupy the biggest Western banks for years as they face inquiries into suspected manipulation of interest rates and currency benchmarks. At least a dozen firms have been contacted by authorities in the U.K., the U.S. and Switzerland who are probing allegations that traders at banks manipulated spot foreign-exchange rates for at least a decade, affecting the value of funds and derivatives.
Jain, 51, is returning to Davos two days after the Frankfurt-based bank posted a fourth-quarter loss, hurt by legal costs and restructuring charges. Jain said in a statement the bank is "confident" of meeting its targets for 2015 and told analysts this year will be a turning point as the lender puts the impact of new rules behind it.
The lender is conducting an internal review of whether members of the management board played a role in attempts to rig benchmark interest rates. In December, Deutsche Bank paid $983 million to settle claims about manipulation of the London interbank offered rate, or Libor, in the single biggest European Union antitrust penalty.
The six biggest U.S. banks set aside more for legal costs in 2013 than any year since at least 2008, and in Europe, the 11 lenders with the highest legal costs over the past two years racked up at least $10.8 billion in regulatory fines and settlements last year, according to data compiled by Bloomberg. That's 61 percent more than in 2012.
"Politicians remain to be convinced that bankers have done enough to clean up their act," said Howard Davies, a board member of New York-based Morgan Stanley, the sixth-biggest U.S. bank by assets, and a former deputy governor of the Bank of England. "Bankers declared war was over far too soon."