- The CEO, who steered the financial giant safely through the 2008-09 financial crisis, came clean in a conference call with investors after the market closed Thursday and acknowledged that the bank has suffered a $2 billion trading loss, mostly occurring in the past six weeks.
News of the unexpected loss, which will result in an estimated second-quarter loss of about $800 million for that segment of its business, resulted from what Dimon says was a "flawed" and "sloppy" derivatives trade executed by the bank's chief investment office, whose job it is to manage or hedge the bank's own risk. The division had been expected to show a profit of $200 million.
"This portfolio," the bank said in a regulatory filing Thursday, "has proven to be riskier, more volatile and less effective as an economic hedge as the firm previously believed."
In a conference call with investors, Dimon described the trade as "poorly executed and poorly monitored."
Shares of JPMorgan (JPM), which closed up 10 cents to $40.74, fell nearly $7 in after-hours trading.
The news packed a not-so-pleasant public relations punch, causing a hit to the firm's credibility and reputation.
"It is one of the largest, safest and best-managed banks out there," says Michael Farr, president of money management firm Farr Miller & Washington and a JPMorgan shareholder. "Part of me now says if it can happen there it can happen anywhere. This is the kind of surprise investors don't like." Read full article