JPMorgan Trading-Loss Days Most Since Financial Crisis

JPMorgan Chase & Co. (JPM) posted more unprofitable trading days than any quarter since the depth of the financial crisis as the largest U.S. bank struggled to unwind credit-derivatives bets.

Traders lost money on 28 days in the second quarter, compared with one day in the first three months of the year, New York-based JPMorgan said today in a regulatory filing. That was more than in all of 2011 and the most since 37 days of losses in the fourth quarter of 2008, after the collapse of Lehman Brothers Holdings Inc. roiled global markets.

Chief Executive Officer Jamie Dimon, 56, ousted traders and managers and overhauled the ranks of senior executives amid $5.8 billion in losses on a trading position at the chief investment office in London. The losses prompted the retirement of Chief Investment Officer Ina Drew and spurred shareholder lawsuits and probes by the U.S. Justice Department, Federal Bureau of Investigation and Securities and Exchange Commission.

The bank “appreciably reduced the risk profile” of the derivatives portfolio during the quarter, JPMorgan said in the filing. It said the portfolio “under certain extreme, simulated scenarios” could lose as much as an additional $1.7 billion, the same figure Dimon gave last month.

So-called value-at-risk, or VaR, which measures how much the bank estimates it could lose on 95 percent of its trading days, increased to $201 million during the second quarter from an average of $94 million during the same period last year.

Exceeding VaR

Three of the daily losses during the second quarter exceeded the firm’s VaR because of the synthetic credit portfolio.

Traders in JPMorgan’s investment bank, chief investment office and mortgage unit posted gains exceeding $200 million on two days in the second quarter, compared with one day in the previous period.

Morgan Stanley traders incurred losses on 15 days during the second quarter, with none exceeding $50 million, the New York-based company said in an Aug. 6 filing. Bank of America Corp., the second-largest U.S. lender, recorded trading losses on three days in the quarter, with the biggest at $11 million, the Charlotte, North Carolina-based firm said last week.

To contact the reporters on this story: Dawn Kopecki in New York at dkopecki@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.