JPMorgan Chase, the nation's largest bank, said Thursday it has lost $2 billion in a complex hedging strategy over the past six weeks and could lose more.Christopher Whalen, Tangent Capital Partners, discusses what impact JPMorgan's $2 billion trading loss means for other financials.
In a conference call to analysts and investors, CEO Jamie Dimon said the 'flawed' hedging strategy was "poorly constructed, poorly reviewed, poorly executed, and poorly monitored."
As a result, the bank expects to lose $800 million in its corporate segment this quarter, compared with previous estimates that the segment would post $200 million in profit. Some of the hedging losses were offset by taking $1 billion in previously unrealized gains from the bank's portfolio.
Finbarr O'Reilly / Reuters, file
Workers erect a sign for JPMorgan Chase in London.
The company's shares plunged more than 6 percent in late electronic trading after the loss was announced. Other bank stocks, including Citigroup and Bank of America suffered heavy losses as well.
Dimon said the bank suffered losses as a result of a strategy to hedge against global credit risk. He declined to specify further.
He said the bank is working through the problems but expects continued volatility, and losses could grow.
"Hopefully this will not be an issue by the end of the year," he said.
He said some of the losses were a result of the volatile market environment. Markets have been roiled recently by concerns over Europe, which has slipped back into recession.
The losses are still a relatively small amount compared to the approximately $200 billion portfolio managed by the company's chief investment office, where the hedging strategy was executed.
No comments:
Post a Comment