Dimon says JPMorgan loss due to bad trade triples to US$5.8b
Source: Agencies |
July 14, 2012, Saturday
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JPMORGAN Chase yesterday said a bad trade had cost the bank US$5.8 billion this year, almost triple its original estimate, and raised the prospect that traders had acted improperly to conceal the blunder.
"This has shaken our company to the core," CEO Jamie Dimon said.
The bank said all managers in the London office responsible for the bad trade had been dismissed without severance pay and that it planned to revoke two years' worth of pay from each of those executives.
JPMorgan said it had lost US$4.4 billion because of the trade from April through June, and its chief financial officer said the bank had lost an additional US$1.4 billion in the first three months of this year.
Dimon's original estimate of the loss from the bad trade, disclosed in a surprise conference call with Wall Street analysts on May 10, was US$2 billion.
The bank said that an internal investigation, including e-mails and voice messages, had called into question the values that traders placed on certain bets, and that the traders may have been seeking to mask losses.
The United States Securities and Exchange Commission did not immediately respond to a request for comment.
Dimon told Congress last month that the trade was meant to hedge risk to the company and protect it in case "things got really bad" in the global economy. Instead, the trade had backfired and damaged the bank's reputation.
Speaking broadly about the trading loss yesterday, Dimon told analysts: "We don't take it lightly."
He added: "We're not making light of this error, but we do think it's an isolated event."
The bank said it was reducing its net income for the first quarter of this year by US$459 million because it had discovered information that "raises questions about the integrity" of values placed on certain trades.
Dimon said the bank had closed the division responsible for the bad trade and moved the remainder of the trading position under its investment banking division.
Overall, JPMorgan said it earned US$5 billion, or US$1.21 per share, for the second quarter, which covers April through June and includes the bank's disclosure of the trading loss on May 10. Analysts surveyed by FactSet, a provider of financial data, had expected JPMorgan to earn 76 US cents per share.
Just three months ago, JPMorgan was viewed as the top American bank, guided by Dimon's steady hand. Since the disclosure of the trading loss, however, that reputation has been eroded. JPMorgan has lost about 15 percent of its market value since the loss came to light.
The bank could take back pay from executives in charge of the division where the bad-trade losses occurred. That procedure is known as a "clawback." It would be the first time JPMorgan exercised such a procedure.
"This has shaken our company to the core," CEO Jamie Dimon said.
The bank said all managers in the London office responsible for the bad trade had been dismissed without severance pay and that it planned to revoke two years' worth of pay from each of those executives.
JPMorgan said it had lost US$4.4 billion because of the trade from April through June, and its chief financial officer said the bank had lost an additional US$1.4 billion in the first three months of this year.
Dimon's original estimate of the loss from the bad trade, disclosed in a surprise conference call with Wall Street analysts on May 10, was US$2 billion.
The bank said that an internal investigation, including e-mails and voice messages, had called into question the values that traders placed on certain bets, and that the traders may have been seeking to mask losses.
The United States Securities and Exchange Commission did not immediately respond to a request for comment.
Dimon told Congress last month that the trade was meant to hedge risk to the company and protect it in case "things got really bad" in the global economy. Instead, the trade had backfired and damaged the bank's reputation.
Speaking broadly about the trading loss yesterday, Dimon told analysts: "We don't take it lightly."
He added: "We're not making light of this error, but we do think it's an isolated event."
The bank said it was reducing its net income for the first quarter of this year by US$459 million because it had discovered information that "raises questions about the integrity" of values placed on certain trades.
Dimon said the bank had closed the division responsible for the bad trade and moved the remainder of the trading position under its investment banking division.
Overall, JPMorgan said it earned US$5 billion, or US$1.21 per share, for the second quarter, which covers April through June and includes the bank's disclosure of the trading loss on May 10. Analysts surveyed by FactSet, a provider of financial data, had expected JPMorgan to earn 76 US cents per share.
Just three months ago, JPMorgan was viewed as the top American bank, guided by Dimon's steady hand. Since the disclosure of the trading loss, however, that reputation has been eroded. JPMorgan has lost about 15 percent of its market value since the loss came to light.
The bank could take back pay from executives in charge of the division where the bad-trade losses occurred. That procedure is known as a "clawback." It would be the first time JPMorgan exercised such a procedure.
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