“Egregious’” Failure At JPMorgan Causes $2 Billion Loss
Not a good day for JPMorgan (JPM). JPMorgan is off significantly in afterhours trading. The chief investment office (CIO) suffered major losses of about $2 billion on their synthetic credit portfolio. Jamie Dimon called the loss an “egregious’” failure.
From the 10Q
Since March 31, 2012, CIO has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the Firm previously believed. The losses in CIO's synthetic credit portfolio have been partially offset by realized gains from sales, predominantly of credit-related positions, in CIO's AFS securities portfolio. As of March 31, 2012, the value of CIO's total AFS securities portfolio exceeded its cost by approximately $8 billion. Since then, this portfolio (inclusive of the realized gains in the second quarter to date) has appreciated in value.
On the conference call Jamie Dimon was obviously ticked off that this happened. He said "this could easily get worse...we're going to manage for economics and not panic or do anything stupid". This was "bad strategy, bad environment". On other banks suffering similar losses Dimon commented "just because were stupid doesn't mean anyone else is".
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