JPMorgan Chase & Co., still shaken by the fallout from last year’s record trading loss, was upgraded to stable from negative by Standard & Poor’s as the credit firm’s doubts about the “London Whale” episode eased.
The bank “has successfully addressed our concerns regarding risk-management missteps in its chief investment office portfolio,” S&P said in a statement today about JPMorgan’s credit outlook. “Corrective actions should prevent additional issues from arising.”
Chairman and Chief Executive Officer Jamie Dimon and other top executives misled investors and dodged regulators as losses escalated on a “monstrous” derivatives bet, according to a 301-page report released this month by the Senate Permanent Subcommittee on Investigations. Bruno Iksil, the U.K. trader behind the bets, was nicknamed the London Whale because his positions were so huge.
The biggest U.S. bank “mischaracterized high-risk trading as hedging,” and withheld key information from its primary regulator, sometimes at Dimon’s behest, investigators found. Managers manipulated risk models and pressured traders to overvalue positions to hide growing losses, the panel said.
The Senate probe could help regulators make a case that JPMorgan executives broke the law, drawing on the report, more than 90,000 e-mails and documents, 200 transcribed telephone calls and 25 interviews with bank officials. The report may also ratchet up pressure on Dimon, 57, to surrender his role as chairman of the New York-based company to improve governance.
S&P said its more optimistic outlook reflects “our expectation that further regulatory scrutiny will not result in additional egregious findings and that legal suits will not have a material impact on profitability or lead to significant senior management changes.”