JP Morgan Chase 2012 Annual Report Download - page 22

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Our fortress balance sheet, including our
strong return on capital, provides us with
excess capital to invest, and we always are
thinking way ahead about the best ways to
deploy it. As we have said in the past, after
steadily increasing dividends, our favorite
deployment is in growing our businesses.
After investing in the growth of our busi-
nesses, we look at other ways to use the
remaining excess capital. One use we
consider is buying back stock – but only at
a price we think is good for shareholders.
In March, we passed the Federal Reserve
Board’s Comprehensive Capital Analysis and
Review (CCAR) stress test, which allows the
firm to increase the dividend (the Board of
Directors intends to increase the dividend
to $0.38 per share eective in the second
quarter of 2013 – where it was before the
crisis) and to repurchase an additional
$6 billion of common equity. The equity
buyback plan is less than half of what it was
last year because we would like to get to our
target Basel III Tier 1 common ratio of 9.5%
by the end of 2013.
We are strong believers in proper stress
testing – we do hundreds of stress tests each
week, primarily on our market-sensitive posi-
tions and on multiple dierent scenarios as
well. And while we passed the Federal Reserve
Board’s CCAR stress test (the Federal Reserve
Board did not object to our proposed capital
distribution plan), we were asked to submit an
additional capital plan by the end of the third
quarter addressing the weaknesses identified
in our capital planning process. Following
its review, the Federal Reserve Board may
require us to modify our capital distributions.
We are dramatically increasing the resources
deployed and hope to successfully address all
the weaknesses identified. As in everything
else, we will strive to be best in class in the
CCAR stress test.
In recent years, the company has been able
to grow its business, increase its dividend,
buy back stock and materially increase its
capital ratios (which, as you can see in the
chart below, are much stronger – particularly
if they are applied on a consistent basis).
 Analyst earnings estimates* Pro forma
4Q 20134Q 20124Q 20131Q 2013201220112010200920082007
7.0% 7.0 %
9.8% 10.1%
11.0%
10.2%
11.3% 11.6%
9.5%
10.6%
8.7%
8.8%
Impact of new rules**
Target
Basel I
Basel III
JPMorgan Chase Capital Levels
* Assumes analyst estimates for net income, dividends and share repurchases
** New market risk rules (Basel 2.5) came into eect 1/1/13