May 11, 2012- On Thursday, JP Morgan said that it had suffered a trading loss of $2 billion from a hedging strategy that failed. The disclosure by the company hit both the reputation of the bank and financial stocks, as well as Jamie Dimon the company CEO.
Starting from the end of last month, the Chief Investment Office of the company has had substantial losses market-to-market in its credit portfolio, it said in their quarterly filing with the SEC.
The company said other gains were able to partially offset the loss and it estimates that the unit that holds that portfolio will post an $800 million loss for the second quarter, excluding an litigation expenses or results from private equity. The bank previously had forecasted nearly a $200 million profit.
During a conference call, Dimon said it could cost the company close to a $1 billion. The amount of money lost might be less than what it costs the bank and Dimon’s reputation. The bank is the largest bank in the U.S. and had over $2.32 trillion in assets with over $190 billion in shareholder equity.
The bank has been looked upon as a very dependable risk manager, as it never reported a loss throughout the financial crisis. It was strong enough during the crisis that it took over Washington Mutual, a consumer bank and Bear Stearns an investment bank in 2008.