Thursday, April 17, 2008
jpmorgan raising capital
The hush-hush plans to raise capital at the Wall Street bank would certainly seem to contrast against remarks made by JPMorgan CEO Jamie Dimon earlier Wednesday, who had said that the credit mess was “working itself out.” No mention was made on the earnings call about raising $6 billion, and a source that spoke with HW reacted to the news with stunned silence upon hearing of the plan.
“I can’t imagine that a $6 billion capital raise would just have slipped the minds of the execs [at JPMorgan],” said one source, who asked not to be named. “I really don’t know what to say.”
Lehman sold $4 billion of preferred shares earlier this month. Citi has raised capital via preferred shares as well, paying 8.13 percent on stock it sold back in January. There are others, obviously. But none had the apparent audacity to file a preliminary prospectus only hours after an important quarterly earnings call, without so much as mentioning anything about a plan to do so during the call.
“It just takes all of the steam out of things,” said the same source. “I mean, most of us had taken the earnings report as a half-good thing, after all, with Dimon’s remarks. Now what are we supposed to think?”
questions about jpmorgan's exposure to commercial real estate are already in the air. federal reserve board member donald kohn reiterated yesterday the concern of the government generally for regional and smaller banks, but what few talk about is the fact that jpmorgan chase is also more heavily exposed in this area. the distribution of assets has served it pretty well in the residential housing bust; but now that a commerical bust is underway, jpmorgan would seem to be in more trouble than most suspect.
and with an unwind in the CDS market lurking in the growing shadows of this credit crisis, one might soon with the benefit of retrospect wonder why anyone thought jpmorgan was in a position of strength the day they bailed out bear stearns.
UPDATE: what's worse, jpmorgan appears to be dissembling, per felix salmon.
UPDATE: more from ft, which speculates that bear stearns is just that toxic.