NEW YORK: JPMorgan Chase's required capital will increase ‌under revised draft U.S. rules, in contrast to its Wall Street rivals which stand to win relief, executives said on Tuesday, warning the possible result was bad for borrowers.

The bank's new capital ​estimates, released during its first quarter earnings, mark the latest twist in a year-long industry fight over the draft rules which could pitch the country's largest lender against its peers as it ​tries ​to level the playing field.

Speaking during a call on Tuesday, JPMorgan chief financial officer Jeremy Barnum said under the revised draft "Basel" and "GSIB" surcharge rules the Federal Reserve unveiled last month, the bank's capital would increase around 4%, while its peers would enjoy a 4.8% decline on average.

"We recognize that ⁠we are larger and more systemically important than even large domestic peers, but in the end, the question is how much more should the cost be?," he said, adding the bank would be providing feedback to regulators.

"Everyone wants to move on, so our comments will be very focused," he added.

 

LOBBYING PUSH FRUITION

First quarter earnings have offered a key opportunity for analysts and investors to hear from top bank executives on the capital impact of the revised rules, which were first unveiled in 2023. ​Big banks, including JPMorgan, fought ‌hard to water down those ⁠original drafts, which they said ⁠would hike their capital by as much as 20%.

Those efforts appeared to come to fruition last month, when the Fed predicted that big bankcapital levels would fall between 4.8% and ​7.8% under the softened drafts, freeing up billions of dollars for lending, dividends and share buybacks.

But the exact amount ‌of money that may ultimately be released is unclear, and JPMorgan's Tuesday estimates underscore how closely each bank's ⁠capital outcome is tied to its specific business models, including its funding mechanisms.

Barnum noted that a change in the way the Fed assesses short-term wholesale funding under proposed changes to the GSIB surcharge, an extra layer of capital levied on globally systemically important banks, would penalize JPMorgan relative to its peers.

 

GOLDMAN, MORGAN STANLEY WINNERS?

Citigroup CFO Gonzalo Luchetti said on a call with reporters on Tuesday the new Basel III rules will be a moderate positive for the bank, but declined to estimate how much excess capital could be released. Executives said they expect to provide more details during the bank's investor day in May.

Also on Tuesday, Wells Fargo CEO Charles Scharf said "the trajectory is very favorable for us," but would not be drawn on how much capital the bank believed it may be able to release.

Big banks began hoarding capital after the initial 2023 drafts were unveiled. Morgan Stanley analysts estimated in a recent client report that big U.S. banks ‌may be able to release up to $320 billion in capital now they have more clarity on where the ⁠rules will land.

On Monday, Goldman Sachs CEO David Solomon said the bank was encouraged by the new ​drafts, and expected to feed back to regulators. "We have also been clear that the regulatory framework needs to be transparent and calibrated appropriately to achieve its objectives," he told analysts.

Reuters reported last month that some analysts expect Goldman and Morgan Stanley, which reports earnings on Wednesday, to be big winners under the new drafts, thanks to the change to the GSIB ​short-term wholesale funding methodology ‌that Barnum said will hurt JPMorgan.

JPMorgan currently has about $40 billion in excess capital, which could change depending on the ultimate ⁠rules, CEO Jamie Dimon said on a call on Tuesday. (Reporting by ​Tatiana Bautzer; additional reporting by Saeed Azhar in New York and Manya Saini in Bengaluru; editing by Michelle Price and Nick Zieminski)