JP Morgan surprise press conference to report new $2 bln losses | Banking Insight

Posted on May 10, 2012 by zyakaira

NEW YORK, NY - MAY 03:   JPMorgan Chase & Co. ...

NEW YORK, NY – MAY 03: JPMorgan Chase & Co. chairman and CEO Jamie Dimon waits before speaking at Simon Graduate School of Business at the University of Rochester’s New York City Conference on May 3, 2012 in New York City. Dimon spoke about the state of the economy and regulations in the banking industry. (Image credit: Getty Images via @daylife)

The JP Morgan Treasury / Chief Investment Office is purportedly carrying losses of up to $4.5 bln and the same would be disclosed in a press conference in detail in a few minutes. The CIO’s Office carries Synthetic hedges betting the CDS index and the so called Whale trader was carrying a large position against the general market reported just before results.

The bank will likely report a $800 mln Q2 loss. Like others a ratings downgrade would require them to immediately pony up $1.5 bln in additional capital for a two notch downgrade. The number for Bank of America is $6 bln.

$2 bln credit loss was booked in synthetic Index positions but balanced by a $1 bln gain in credit exposures.  The bank is going back to the Old Var model after the new strategy was found to be poorly executed and monitored. Jamie Dimon admits that is sloppiness and error of judgment and assures everyone that this does not concern any clients. The bank is willing to bear volatiliy at a cost of $1 bln in the coming months.

“We will..fix it and move on.”

Most of the $2 bln in synthetic hedge losses have landed up after Q1 results and “any individuals found to be responsible after these positions were discovered will be dealt with”

The CIO also carries another $8 bln in unrealised gains. The hedge strategy was hopefully an isolated accident for the bank as it gets it back on track

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