Losses at JPMorgan Grow

Jamie Dimon said that the trading losses at JPMorgan Chase ($JPM) totalled $2 billion and that there might be another $1 billion to add over the next few quarters. The bank was stuck with a terrible position that it was trying to unwind. The market smelled blood and traders have attacked JPM’s position. Instead of the next few quarters, it looks like their losses grew by another $1 billion over four days.

A spokeswoman for the bank declined to comment, although Mr. Dimon has said the total paper trading losses will be volatile depending on day-to-day market fluctuations.

The Federal Reserve is examining the scope of the growing losses and the original bet, along with whether JPMorgan’s chief investment office took risks that were inappropriate for a federally insured depository institution, according to several people with knowledge of the examination. They spoke on the condition of anonymity because the investigation is still under way.

The overall health of the bank remains strong, even with the additional losses, and JPMorgan has been able to increase its stock dividend faster than its rivals because of stronger earnings and a more solid capital buffer.

Still, the huge trading losses rocked Wall Street and reignited the debate over how tightly giant financial institutions should be regulated. Bank analysts say that while the bank’s stability is not threatened, if the losses continue to mount, the outlook for the bank’s dividend will grow uncertain.

The bank’s leadership has discussed the impact of the losses on future earnings, although a dividend cut remains highly unlikely for now. In March, the company raised the quarterly dividend by 5 cents, to 30 cents, which will cost the bank about $190 million more this quarter.

Posted by on May 17th, 2012 at 9:38 am


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