JP Morgan Chase, the biggest bank in the US, has been left with at least $2 billion in trading losses after complex investments made by its traders boomeranged.
CEO Jamie Dimon said the portfolio in question had proved “riskier, more volatile and less effective as an economic hedge” than the bank had initially believed, adding during a hastily arranged conference call late Thursday that overall losses in the second quarter – after accounting for other gains – could be as big as $1 billion due to the trade, according to Fox Business.
The trade, which Dimon called “flawed, complex, poorly reviewed, poorly executed and poorly monitored,” came from the bank’s Chief Investment Office (CIO), which manages risk for the New York company. The loss was initially revealed in a regulatory filing.
According to The Wall Street Journal, the bank, betting on a continued economic recovery with an intricate series of trades tied to the values of corporate bonds, was hit badly when prices moved against it last month, resulting in losses in many of its derivatives positions.
Dimon said the bank’s mistake was “egregious” and “self-inflicted,” adding: “We will admit it, we will learn from it, we will fix it and we will move on.”
Shares in JP Morgan fell 6 percent after-hours, with Goldman Sachs, Citigroup and Bank of America also suffering heavy losses in electronic trading after the market close, the BBC reports.
Dimon said the bank – which emerged from the 2008 financial crisis in much better shape than many of its rivals after steering clear of the risky investments that had damaged others – was trying to unload the portfolio in question in a “responsible” manner to minimise the cost to shareholders.