Jamie Dimon image

Jamie Dimon, CEO of JP Morgan Chase, is currently at the 0.01% conference in Davos, Switzerland. Jamie Dimon conducted a lengthy interview with CNBC, where he discussed the European crisis.

Dimon had some very surprising, and seemly arrogant words. He said the impact of a Greek default on U.S. banks should that happen, he said, would be “almost zero.”

He stated that the real issue is Spain and Italy, but seemed to seperate the two countries from Greece.

So how do Jamie Dimon’s comments match up with some data about JP Morgan’s exposure to Greece and other European countries?

J.P. Morgan Chase International Chairman Jacob Frenkel said on January 26th, that the bank has exposure to European distressed debt of “about $15 billion,” but even “under the worst-case scenario J.P. Morgan will be fine.”

That is total European exposure, not Greek. However we fail to understand why even under the worst case scenario all would be fine. We believe that Frenkel would expand on this statement but he did not.

Here is more data on the topic compiled by the Wall Street Journal:

We believe it almost impossible to understand banks’ balance sheets, even if they no longer have special purpose vehicle, like they claim. However this chart shows that JP Morgan has net exposure of $15B just to PIIG countries. The chart also shows that this is close to 15% of the company’s Tier 1 common equity. We doubt anyone including the regulators would consider $15B to be an insignificant number.

Dimon while admitting that Spain and Italy are big problems, fails to mention the contagion effect. As the European leaders have delayed an effective response to Greece, the problems have spread to Italy and Spain. Italian bond yields reached records recently, and there is worry about their ability to finance the debt load. People are even beginning to worry about the financial status of the “safe Northern countries”  of Europe. If Greece defaults the markets could really panic, and sell off debt from other countries like Spain and Italy.

Dimon also leaves out an important point. While it hard to get numbers on JP Morgan’s exposure to Greece alone, we can assume it is low. However there is a canary in the coal mine here. European banks have over 90 billion Euros of exposure to Greece. JP Morgan does business with these banks all the time.

This is why we think Dimon’s statements were arrogant and dangerous. We even wonder if shareholders could sue Dimon over his statements, if Greek does default and it effects JP Morgan.

No position in JP Morgan