JPMorgan Loses on 7 Days as Whale Derivative Bet Unwinds

JPMorgan Chase & Co. (JPM)’s traders in its investment bank lost money on seven days during 2012, down from 26 in 2011.

The traders lost money on just four days last year excluding debt-valuation adjustments and the impact of a credit derivatives portfolio that was transferred from the firm’s chief investment office, which had amassed the bet and lost more than $6.2 billion on it, the bank said in an investor presentation released at its New York headquarters today.

Daniel Pinto, 50, the co-chief executive officer of the company’s corporate and investment bank, has been overseeing the wind-down of the CIO portfolio, which helped increase the CIB’s value-at-risk to $84 million in 2012, from $76 million in 2011. Value-at-risk, or VaR, measures the most the bank might lose on 95 percent of its trading days.

The results disclosed in the presentation today reflect performance in the corporate and investment bank alone and exclude other divisions. Across the firm, including in its chief investment office, traders lost money on 39 days in the first nine months of 2012.

Average daily revenue in the trading unit was $69 million in 2012, up from $60 million in 2011, according to the presentation.

JPMorgan’s trading business has produced enough revenue to cover its expenses and cost of capital for 11 of the past 12 quarters, with the third quarter of 2011 as the exception, according to the presentation.

London Losses

CEO Jamie Dimon, 56, ousted traders and managers and replaced senior managers following the so-called London Whale episode at the firm’s chief investment office. The unit, assigned to invest the bank’s idle cash until it was needed, amassed a portfolio of credit derivatives that generated the company’s biggest trading loss ever. It was transferred to the corporate and investment bank in July.

The botched bets prompted the retirement in May of Chief Investment Officer Ina Drew, 56, spurred lawsuits from shareholders and drew civil and criminal probes by at least three U.S. agencies.

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

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