Voldermort losses at JPMorgan 'have now doubled to £4.4bn'

Daily Mail, by Damien Gayle, 21 May 2012

 

Losses at JPMorgan Chase's embattled London trading operation could be as much as £4.4billion, more than double what it had forecast.

The new estimate of the cost of the catastrophic trading blunder announced two weeks ago threatens to make it one of the biggest financial disasters in City history.

The claims come as chief executive Jamie Dimon announced that the bank is suspending plans to buy back $15billion worth of shares.

Catastrophic trading blunder: Finance industry sources believe the
 mammoth loss racked up by JPMorgan's London office could as
much as £4.4billion

'It's an embarrassment, it's a black mark,' Mr Dimon said of the trading loss. But he added that the bank's balance sheet was 'barely nicked' by the loss.

JPMorgan, the U.S.'s biggest bank and once seen as on of the safest on Wall Street, is still trying to unwind the mammoth trading positions taken by London-based French trader Bruno Michel Iksil.

Rival traders working on desks specialising in the derivatives the bank used to make its trades now reckon the losses could total nearly $7billion (£4.4billion).

JPMorgan had last week estimated that the losses could hit $3billion. 

Stress: JP Morgan boss
 Jamie Dimon has announced
 the curtailment of the
 bank's $15billion share buy
back

'The market knows roughly what [JPMorgan] has and what the sizes are,' a source with knowledge of the bank's positions told CNN Money.

JPMorgan's trades were built around contracts tied to corporate bonds in which it sold protection against risk on an index of 125 highly rated bonds.

If the market had continued to rally then the bank stood to make huge gains, however the ongoing eurozone crisis which has dragged down markets worldwide took its toll on the positions.

Speaking at a meeting with investors today, Mr Dimon did not provide an update on the size of the losses suffered through the trading blunder, merely admitting that 'obviously, we're not going to make as much money'.

He said the bank has made progress working down the losing trades. 'We are going to wrestle the problem down,' he said.

JPMorgan's share price was down 2 per cent at $32.82 in early afternoon trading, 

underperforming relative to rival banks' stocks. The bank's stock has lost about $28billion of market value since the trading losses were announced on May 10.

Mr Dimon said the bank intends to restart stock buybacks once it has replenished the lost capital.

The bank is capitalised well enough to easily withstand the losses, according to analysts. It had $190billion of shareholder equity supporting $2.32trillion in assets at the end of March.

The tempest engulfing JP Morgan has already claimed the jobs of several senior officials. Achilles Macris, who ran the London desk that made the botched trades, was expected to depart along with one of his senior lieutenants, Javier Martin-Artajo. 

Gone: Ina Drew, 54, has been
forced out as head of JP Morgan's
 Chief Investment Office

They followed Ina Drew, JPMorgan's chief investment officer and one of the most powerful women on Wall Street, out of the door as shareholders demanded blood for the debacle.

Other departures in London were last week said to be likely, with Mr Iksil, the man said to be directly responsible for the trades, almost certain to be on the hit list.

The highly paid banker was nicknamed the 'London Whale’ because of the huge trading positions he took in the credit markets.

JPMorgan's share price was down 2 per cent at $32.82 in early afternoon trading today, underperforming relative to rival banks' stocks.

The bank's stock has lost about $28billion of market value since the trading losses were announced on May 10.

Dimon said the bank intends to restart stock buybacks once it has replenished the lost capital. The bank is capitalised well enough to easily withstand the losses, according to analysts. It had $190 billion of shareholder equity supporting $2.32 trillion in assets at the end of March.

Read more:

CNNMoney: JPMorgan Chase loss only going to get worse