JP Morgan Profits Get Hit From Derivatives Trade Losses Which Are Already Surpassing Previous Estimated Levels

Friday, July 13, 2012 10:13
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JP Morgan Profits Get Hit From Derivatives Trade Losses Which Are Already Surpassing Previous Estimated Levels

Tags: banks | derivatives

The losses incurred by the JPMorgan Chase derivatives trading debacle have surpassed the previous outlier level of $5 billion. So far, losses have come in at $5.8 billion and have caused the firm’s profits to decline by 9%.

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The bank still reported a profit in its recent earnings report for the second quarter. But it also said it would restate first quarter earnings because of uncertainty regarding the impact the trades may have had as a result of inflated valuations.
 
Traders may have misstated the value of those positions to cover losses incurred from the failed derivatives bets. JPMorgan chief Jamie Dimon continued to claim that continuing risks from the failed trades had been mitigated but he did not disclose how much more damage might result.
 
Meanwhile, the bank’s supervisor of its chief investment office will give up a major portion of her compensation. The leader of the investigative effort into the trading debacle confirmed what Dimon had said, noting that the complexity of the trades grew to a point where they surpassed the ability of the managers to contain them.
 
The bank also stated it would recover compensation from the three London-based executives responsible for the trades.

 

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