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The largest US asset bank entered the coronavirus-induced crisis from a position of strength and showed in previous Federal Reserve stress tests that it could weather a recession, Dimon said Monday in an annual letter to shareholders. But if a more serious “extremely unfavorable scenario” occurs with a 35% drop in gross domestic product and 14% unemployment, the bank will have difficult decisions to make.
“If it were to materialize, the board of directors would likely consider suspending the dividend, even if it is a fairly small claim on our share capital,” said Dimon. “If the Board of Directors suspended the dividend, it would be out of extreme caution and based on persistent uncertainty about what the next few years will bring. “
The message is expected to spread among investors and banking analysts. Executives, including the heads of Citigroup and Goldman Sachs, said in interviews with CNBC that even though the largest US banks voluntarily withdrew from share buybacks at the start of the crisis, their dividends were secure. Now, as the leader of the most valuable bank in the world in terms of market capitalization addresses the subject of the suspension of dividends, it would seem that most banks could also be vulnerable if the economy does not eventually recover. year.
JPMorgan has steadily increased its dividend in recent years, reaching a quarterly payment of 90 cents per share.
“We don’t know exactly what the future holds – but at a minimum, we assume it will include a bad recession combined with some sort of financial stress similar to the 2008 global financial crisis,” said Dimon. “Our bank cannot be immune to the effects of this type of stress. “