NEW YORK (Reuters) - JPMorgan Chase & Co has suspended repurchases of its stock while it tries to get out of money-losing derivatives trades that have cost it at least $2 billion, Chief Executive Jamie Dimon said on Monday.
He said the bank would maintain its dividend.
It is the first time Dimon has said the bank will change how it manages its capital in the wake of what he has called "egregious mistakes" in the derivatives trades.
The CEO, speaking at an investor conference, said the bank was holding off on buybacks to make sure it stays on its planned "glide path" of building capital to reach rising requirements being imposed under so-called Basel 3 standards.
He said the bank has made progress working down the losing trades. "We are going to wrestle the problem down," he said.
In March, following a new round of street tests, JPMorgan won permission from the U.S. Federal Reserve to spend as much as $12 billion buying back stock this year and another $3 billion early next year.
In April, Dimon said in a letter in the company's annual report that buybacks at prices under $45 a share were good for stockholders.
JPMorgan's stock has lost about $28 billion of market value since the trading losses were announced May 10.
Dimon said the bank intends to restart stock buybacks once it has replenished the lost capital. The bank is capitalized well enough to easily withstand the losses, according to analysts. It had $190 billion of shareholder equity supporting $2.32 trillion in assets at the end of March.
JPMorgan shares fell as much as 3.6 percent after Dimon began speaking as the market opened. The shares recovered quickly and were down 1.1 percent at $33.11 in mid-morning trading.
Dimon warned on May 10 that the trading losses could increase by $1 billion, or more, before the bank unwinds the trades, which could take the rest of this year. Some analysts have estimated the losses could reach $5 billion.
The faulty portfolio was built of layers of supposedly offsetting bets with credit derivatives tied to corporate bonds, both investment grade and junk. A key model for measuring risk in the portfolio was changed sometime during the first quarter. The change made the portfolio look less dangerous than it would have under an older risk model the bank had used for years.
(Reporting by David Henry and Lauren Tara LaCapra in New York and Rick Rothacker in Charlotte, North Carolina; editing by John Wallace)
