JPMorgan admits $2bn loss from failed hedge
JPMORGAN CHASE, America’s largest bank, admitted late last night that it had taken an unexpected $2bn (£1.2bn) loss after a hedging strategy failed.
In a hastily arranged conference call chief executive Jamie Dimon told analysts that the mistakes were “egregious” and that it was a “bad strategy, badly executed and poorly monitored”.
“It could get worse – this could go on for a little bit,” Dimon added, while pointing out gains elsewhere meant the total cost to the company could be around $1bn.
In a regulatory filing the bank said that since the end of March its chief investment office (CIO), which manages risk for the firm, “has had significant mark-to-market losses in its synthetic credit portfolio”.
Last month press reports suggested a UK-based trader in the CIO – dubbed the “London Whale” by critics – had run up dangerously large bets on credit derivatives.
Dimon said the losses were “somewhat related” to these reports.
Shares in the bank dropped seven per cent in after-hours trading.