JPMorgan Chase & Co, the second-largest US bank, has slashed its dividend by 87%, a surprise move by a lender considered among the strongest in the U.S. financial sector.
The bank also said it has been 'solidly profitable' this quarter, and that the outlook for the three-month period is 'roughly in line' with analyst forecasts.
JPMorgan said its decision to lower its quarterly dividend to 5 cents per share from 38 cents will save $5 billion of common equity a year. It hopes the lowered payout will help it pay back the $25 billion of capital it got in October from the government's Troubled Asset Relief Programme faster.
'Extraordinary times must call for extraordinary measures,' CEO Jamie Dimon said on a conference call. He said PMorgan was not asked by anybody to cut the payout, but did so out of a 'normal abundance of caution.'
JPMorgan expects in the first quarter to record about $2 billion of credit costs and writedowns at its investment bank, to boost reserves for credit cards and home lending, and to write down about $400m in its private equity business.
It also said earnings expectations are on track from its September purchase of the banking units of failed lender Washington Mutual.
Analysts, on average, expected JPMorgan to post a quarterly profit of 35 cents per share on revenue of $21.96 billion.
Bank of America and Citigroup, JPMorgan's largest rivals, have slashed their quarterly dividends to a cent per share since November.
Dimon said the dividend cut reflects the potential, not the certainty, for a 'highly stressed environment' of a two-year economic recession where the US unemployment rate rises above 10%, and home prices fall 40% from their peaks.
JPMorgan said it hopes to return to a 'more normalised' dividend when the environment stabilises.
