Friday, May 11, 2012

JPMorgan discloses $2 billion in trading losses

Jamie Dimon, the chief executive of JPMorgan Chase

Source: Press TV

U.S. banking giant JPMorgan Chase on Thursday revealed that it would incur losses that could run into the billions as a result of bad bets on derivatives.

In a unscheduled conference call, chief executive Jamie Dimon reported the trades cost the company around $2 billion in recent weeks, half of which was clawed back.

It "could cost us as much as one billion dollars," Dimon said, admitting that how markets react in the coming days and weeks could put the final price tag much higher.

"It could get worse."

The losses were linked to JPMorgan's Chief Investment Office, which hedged the firm's assets and liabilities against synthetic credit derivatives.

"These were egregious mistakes," Dimon said. "They were self-inflicted and this is not how we want to run a business."

The losses are a humiliation for Dimon - one of Wall Street's best known titans - and for the bank, coming hot on the heels of the 2008 financial crisis. Raw Story


J.P. Morgan is part of JPMorgan Chase & Co. (NYSE: JPM), a global financial services firm with assets of $2.3 trillion. It is a leader in asset management, investment banking, private banking, treasury and securities services, and commercial banking.

Shares of JPMorgan, frequently held up as an example of a bank that withstood the bursting of the housing bubble and subsequent crisis better than most, plunged 6.9% to $37.94 in uncommonly high volume trading after hours. Analyst Mike Mayo called the bank "best in class" in a recent note, but still smacked the stock with a two-notch downgrade. Forbes

The firm was also hit by a cut to the ratings of its residential mortgage servicing unit from Standard & Poor's after the bell Thursday. The action is not exactly the rating cuts Wall Street watchers have been waiting for, with Moody's due to wrap up a review of its ratings on firms including Morgan Stanley and Bank of America in the near future. Forbes

The troubles at the unit, the so-called Chief Investment Office, which makes trades to balance the bank's assets and liabilities, are expected to weigh on the bank's broader earnings.

For example, the corporate group, which includes the Chief Investment Office, is now expected to lose $800 million in the second quarter, the company said in a filing. Previously, JPMorgan had estimated that the group would report net income of roughly $200 million.

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