(Reuters) - JPMorgan Chase & Co (JPM.N) will not keep as much excess capital over required levels as it might have and will make “surgical” changes in its business model in response to proposed new capital regulations, the company’s chief financial officer said on Wednesday.
Speaking at an investor conference in New York, Marianne Lake said JPMorgan will probably hold about one-half a percentage point more in capital than required instead of as much as a full point now that the Federal Reserve has spelled out its plans.
On Tuesday the Fed proposed higher capital requirements than pending international standards for big banks. The higher requirements would hit JPMorgan, the biggest U.S. bank by assets, hardest and could force it to keep more than $20 billion of additional capital.
Lake said JPMorgan’s large derivatives business appears to have been the big factor in its higher burden. She said the bank will likely make “surgical” changes in its business to reduce the impact and stop short of an overhaul of its business model.
The bank can build up the additional required capital by retaining profits over a few quarters, Lake said. Investors are concerned that keeping more capital will dampen returns for shareholder for years to come, as well as slow additional dividends and stock buybacks.
Lake said the company has not decided whether to lower its target for return on equity because of the proposed rule.
Reporting by David Henry in New York; Editing by Dan Grebler