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.
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