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Bank of America, JPMorgan CEOs buy shares
(Agencies)
Updated: 2009-01-22 14:27 NEW YORK -- The chief executives of Bank of America Corp and JPMorgan Chase & Co bought some of their companies' stock in the last week, a sign of confidence as the banking sector struggles with soaring credit losses and a deep recession.
Kenneth Lewis, Bank of America's chief executive, spent about $1.2 million on Tuesday to buy 200,000 common shares, four days after the largest US bank posted its first quarterly loss in 17 years. JPMorgan Chief Executive Jamie Dimon spent about $11.5 million on Friday to buy 500,000 shares, a day after the second-largest US bank said fourth-quarter profit fell 76 percent.
"You have executives trying to shore up shareholder confidence," said Jay Lorsch, a professor at Harvard Business School. "I would expect them to believe shareholders will interpret the purchases as a sign of long-term confidence, as investors worry about the state of the banking sector." Bank of America spokesman Scott Silvestri and JPMorgan spokesman Joe Evangelisti declined to comment. Five Bank of America directors also bought new shares, including lead independent director O. Temple Sloan, SEC filings show. Lewis paid between $5.98 and $6.06 per share, boosting his direct stake by 16 percent to 1,460,997 common shares, worth $9.76 million based on Wednesday's closing price. He also indirectly controls 542,235 bank shares through various trusts, and last November 4 bought 86,000 preferred shares. Dimon paid $22.93 for each of his shares, boosting his direct ownership stake by 16 percent to 3,545,503 common shares, worth $80.2 million as of Wednesday's close. He also indirectly controls 1,570,550 shares in various trusts, a retirement plan and through his wife. "It is great news when officers and directors are buying stock because it indicates they believe it is worth putting money in the business," said Paul Lapides, director of the corporate governance center at Kennesaw State University in Kennesaw, Georgia. "In both cases, $1 million or more is significant. Executives don't like to lose money." Lapides said he owns small amounts of both Bank of America and Citigroup shares. Lewis' investment also came after Bank of America took $20 billion from the government's Troubled Asset Relief Program to help it absorb Merrill Lynch & Co, which it bought on Jan 1. The government will share in losses on $118 billion of debt. Bank of America is based in Charlotte, North Carolina, and JPMorgan in New York. Bank of America shares closed up $1.58, or 31 percent, at $6.68 on Wednesday, while JPMorgan shares rose $4.54, or 25.1 percent, to $22.63. Both banks' shares recouped much of their losses a day earlier. The Standard & Poor's Financials Index rose 14.6 percent. (For more biz stories, please visit Industries)
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