LITTLE ROCK — JPMorgan Chase & Co.’s losses on a bad trade have grown to as much as $9 billion, exceeding the firm’s initial estimates, according to a New York Times report that cites unnamed sources.
Chief Executive Officer Jamie Dimon said May 10 that the bank lost more than $2 billion on bets in credit markets taken by its chief investment office in London, and that the loss could increase by as much as $1 billion this quarter. Dimon, 56, has said JPMorgan doesn’t want to “do anything stupid” by unwinding the trades too quickly, and he hopes that by the end of the year the holdings will no longer have a significant impact on results.
The firm’s losses have increased in recent weeks as JPMorgan sought to exit its holdings, the Times reported, citing unidentified former traders and executives at the bank. The company has already closed out more than half of its positions, the newspaper said.
Joe Evangelisti, a spokesman for JPMorgan in NewYork, declined to comment on the Times story.
“We are now in the realms of speculation in terms of the sheer scale,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA, who has a neutral recommendation on JPMorgan shares. “The final loss will be offset by a number of items including a debt-valuation adjustment gain and gains on the sale of some of their Treasury securities. However, the larger the number, the more difficult it is to reduce the impact.”
Andrew Ross Sorkin, editor of The New York Times Deal-Book and a host of CNBC’s Squawk Box program, said Thursday on CNBC that the losses would be in the range of $4 billion to $6 billion, citing sources he didn’t identify.
Dimon told lawmakers this month that the company would be “solidly profitable” when it reports second-quarter earnings July 13. Although the trading loss had grown to $2 billion for the quarter when the bank disclosed it in May, the net loss for the chief investment office division at that time was $800million. Dimon said JPMorgan had $8 billion in gains in another trading portfolio within the chief investment office and had used $1 billion of that to offset the loss on the credit derivatives portfolio in London.
JPMorgan has lost about $23 billion in market value since the losses came to light May 10.
The loss has heightened concerns that the biggest banks still pose risks to the U.S. financial system, less than four years after the financial crisis in fall 2008.
In a hearing before the House Financial Services Committee last week, Dimon was dismissive when asked if JPMorgan’s losses could total half a trillion or a trillion dollars. He replied bluntly: “Not unless the Earth is hit by the moon.”
The New York Times said JPMorgan may be able to get out of the money-losing holdings by the end of this year, faster than previous estimates. That would mean the company could earn $22 billion in 2013, “more money than any other bank in the world,” Richard Bove, an analyst at Rochdale Securities LLC in Lutz, Fla., said Thursday.
“If this company has got earnings power in the $22 billion range, how bad can it be?” Bove said.
Shares of JPMorgan fell 90 cents, or 2.5 percent, to close at $35.88 after falling more than 4 percent in earlier trading.
Information for this article was contributed by Laura Marcinek, Tom Keene and Mary Childs of Bloomberg News and by The Associated Press.
Business, Pages 29 on 06/29/2012