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JPMorgan loses $2bn after bet goes wrong
JPMorgan Chase took the market by surprise on Thursday after it announced a $2 billion trading loss on credit derivatives trading.
The bank, betting on a continued economic recovery with a complex web of trades tied to the values of corporate bonds, was hit hard when prices moved against it starting last month, causing losses in many of its derivatives positions, said The Wall Street Journal.
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JPMorgan loses $2bn after bet goes wrong
The losses occurred while JPMorgan tried to scale back that trade, it said.
The bank's strategy was "flawed, complex, poorly reviewed, poorly executed and poorly monitored," said CEO James Dimon on Thursday in a conference call with analysts and investors after the stock-market close.
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JPMorgan loses $2bn after bet goes wrong
He called the mistake "egregious, self-inflicted," and said: "We will admit it, we will fix it and move on," he said.
The CEO emphasised that the bank remains profitable despite the trading loss.
"While we don't give overall earnings guidance and we are not confirming current analyst estimates, if you did adjust current analyst estimates for the loss, we still earned about $4 billion after-tax this quarter give or take," he said on the call.
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JPMorgan loses $2bn after bet goes wrong
The bank earned $5.38 billion in the first quarter. The trading loss "plays right into the hands of a whole bunch of pundits out there", said Dimon.
"We will have to deal with that - that's life."
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JPMorgan loses $2bn after bet goes wrong
He admitted the bank acted "defensively" when news reports surfaced, said the Journal.
"With hindsight we should have been paying more attention to it," he said. "This not how we want to run a business."
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JPMorgan loses $2bn after bet goes wrong
Dimon said the bank has an extensive review under way of what went wrong, which he said included "many errors," "sloppiness" and "bad judgement".
Asked what, in hindsight, he should have paid more attention to, Dimon deadpanned: "newspapers", said the Journal.