JPMorgan Traders Lost on 41 Days as ‘London Whale’ Unwinds

JPMorgan Chase & Co.’s traders lost money on two days during the fourth quarter, down from 10 in the prior three months, as the largest U.S. bank stabilized a wrong-way bet on credit derivatives.

Losses occurred on 41 days in 2012, compared with 27 days in the prior year, New York-based JPMorgan said in a securities filing today. The firm made money on 220 out of 261 trading days, earning more than $200 million on eight days, the bank said.

Chief Executive Officer Jamie Dimon, 56, ousted traders and managers and replaced senior managers after the firm’s chief investment office had more than $6.2 billion in losses last year in the so-called London Whale episode. The unit, assigned to invest the bank’s idle cash until needed, amassed a portfolio of credit derivatives that generated the company’s biggest trading loss ever.

The errant trade caused value-at-risk, or VaR, which measures the most the bank might lose on 95 percent of trading days, to surge 50.5 percent to $152 million in 2012 from an average of $101 million in the same period last year.

The results aren’t directly comparable because the firm changed its model twice in 2012 in an attempt to improve accuracy.

Morgan Stanley

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

Bank of America Corp., the second-biggest U.S. lender by assets, said that traders lost $50 million on their worst trading day of 2012, a year in which the firm made money 98 percent of the time.

The bank showed a profit on 243 of the 249 trading days, with profit exceeding $25 million during 80 percent of the sessions, the Charlotte, North Carolina-based company said today in a regulatory filing. In 2011, Bank of America showed a profit 86 percent of the time, with the largest single-day loss of $119 million and losses topping $25 million on 12 days.

Morgan Stanley, owner of the world’s biggest brokerage, lost money in its trading businesses on 37 days last year, down from 64 days in 2011 and the fewest since 2007. The bank’s traders lost money on 10 days in the fourth quarter, up from eight in the third quarter, the New York-based company said Feb. 26 in a filing. Morgan Stanley made more than $100 million on 23 days in 2012.

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