Banks vs. Regulators: Jamie Dimon Goes on the Offensive

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(Article by Alicia Selliti and Becca Lipman. List compiled by Eben Esterhuizen, CFA. Profitability data sourced from Fidelity.)

Jamie Dimon, CEO of JP Morgan Chase, is making headlines today with his controversial call for the deregulation of US banks. His latest rally cry urges America to pull out of Basel III, the incoming international bank rules for functioning in international markets.

Basel regulations were created in response to deficiencies in financial regulations exposed by the global financial crisis.

"The Basel III capital rules are designed to make the financial system safer by making banks build up risk-absorbent ‘core tier one’ capital to at least 7 per cent of risk-weighted assets. The biggest, including JPMorgan, have to reach 9.5 per cent." (via Financial Times)

"Regulators say all countries compromised on agreeing to the rules, which put eight banks – five from outside the US – in the top level of capital."

An outspoken Dimon is calling the rules "blatantly anti-American," claiming the imposition of an additional charge to be an overreaction, and an overcorrection for American banks. "I think any American president, secretary of Treasury, regulator or other leader would want strong, healthy global financial firms and not think that somehow we should give up that position in the world and that would be good for your country.”

Critics are weighing in on both side of the debate. According to John Carney, Senior Editor at CNBC, Dimon’s criticisms don’t go far enough, particularly with regard to covered bonds, the focal point of Dimon’s argument.

“Since Basel III restricts how banks operate and finance themselves, giving an advantage to covered bonds will give an advantage to European banks that already own the bonds.”

But the prospect of deregulation also has many on edge. Those against it are quick to point out how easily deregulated bank structures helped to bring about the financial crisis.

"Let's not have short memories. It's not an excess of capital and regulation that provoked the crisis that we are still suffering from," said European Union Internal Markets Commissioner Michel Barnier. (Via The Economic Times)

Be that as it may, his declarations raise an interesting set of questions about the relationship between US banks and regulators. Do you think banks have won the war against regulators?

Below we list the most profitable banks-- do you think increased regulation will undermine their profits?

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1. JPMorgan Chase & Co. (JPM): Provides various financial services worldwide. TTM gross margin at 79.98% vs. industry average at 62.06%. TTM operating margin at 47.17% vs. industry average at 38.76%. TTM pretax margin at 25.37% vs. industry average at 16.65%.

2. Wells Fargo & Company (WFC): Provides retail, commercial, and corporate banking services primarily in the United States. TTM gross margin at 80.18% vs. industry average at 70.96%. TTM operating margin at 41.61% vs. industry average at 39.21%. TTM pretax margin at 24.08% vs. industry average at 22.38%.

3. Simon Property Group Inc. (SPG): Engages in investment, ownership, and management of properties. TTM gross margin at 44.82% vs. industry average at 38.23%. TTM operating margin at 44.82% vs. industry average at 37.37%. TTM pretax margin at 24.1% vs. industry average at 13.9%.

4. PNC Financial Services Group Inc. (PNC): Operates as a diversified financial services company. TTM gross margin at 79.25% vs. industry average at 70.87%. TTM operating margin at 40.02% vs. industry average at 39.23%. TTM pretax margin at 26.7% vs. industry average at 22.44%.

5. Bancolombia S.A. (CIB): Provides financial products and services to individual and corporate customers in Colombia, Panama, El Salvador, Puerto Rico, the Cayman Islands, Peru, Brazil, the United States, and Spain. TTM gross margin at 73.02% vs. industry average at 70.87%. TTM operating margin at 51.89% vs. industry average at 39.23%. TTM pretax margin at 26.89% vs. industry average at 22.44%.

6. Fifth Third Bancorp (FITB): Operates as a diversified financial services holding company in the United States. TTM gross margin at 75.8% vs. industry average at 70.87%. TTM operating margin at 43.79% vs. industry average at 39.23%. TTM pretax margin at 23.22% vs. industry average at 22.44%.

7. M&T Bank Corp. (MTB): Operates as the holding company for M&T Bank and M&T Bank, National Association that provide commercial and retail banking services to individuals, corporations and other businesses, and institutions. TTM gross margin at 81.58% vs. industry average at 70.87%. TTM operating margin at 45.73% vs. industry average at 39.23%. TTM pretax margin at 33.55% vs. industry average at 22.44%.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: CIB , FITB , JPM , MTB , PNC , SPG , WFC

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