JPMorgan May Post $7.5 Billion in Losses from the London Whale

JPMorgan Chase & Co. (NYSE:JPM) just reported their second quarter earnings with a $5 billion profit (or $1.21 per share compared to $1.27 per share  profit in last year ). The bank suffered a $4.4 billion loss from the trading fiasco in London. JPMorgan Chase & Co. (NYSE:JPM) did manage to post a decent profit for this quarter despite of the lackluster predictions that were given by analysts earlier this week.

The bungled trades that have cost the bank dearly with a sum of $5.8 billion so far are expected to rise even further with an addition of $1.7 billion, as indicated by Jamie Dimon, Chief Executive Officer of JPMorgan Chase & Co. (NYSE:JPM). The bank restated its first quarter earnings to include a $459 million loss that was previously not reported by traders in the chief investment office in an attempt to underplay the losses. The collective losses will then amount to $7.5 billion.

As we mentioned, we expected the $9billion number reported by the New York Times was far too high, but tweeted last night:


Amy Or of the Wall Street Journal strengthena this point, by noting that Hutchin Hill has not completely closed its position on the trade.

The bank’s income has fell 9% from its last quarter earnings and its total market value has also dropped an estimated $40 billion. JPMorgan Chase & Co. (NYSE:JPM) is in the process of putting controls and regulations which will not eliminate all losses but will reduce the chances of further mishaps.

The bank’s CEO said in a statement, “We have already completely overhauled CIO management and enhanced the governance standards within CIO, We believe these events to be isolated to CIO, but have taken the opportunity to apply lessons learned across the firm.”

The bank has fired managers that were responsible for the huge losses and will also retract the salaries of those who are found guilty after an internal investigation. Bloomberg reports that four people gave back two years of income, which was termed as uncommonly severe but justifiable by analysts. On the other hand, the head of U.S. Senate Banking Committee has welcomed the plans to claw back salaries of employees who were responsible for the massive trading losses and were involved in subsequent attempts at hiding them. The bank is cutting off guilty managers without severance packages and is also taking away any awarded bonuses.

“While details are still forthcoming, JPMorgan’s announcement today that it will claw back compensation from employees responsible for the massive trading loss and poor risk management is welcome news,” said U.S. Senate Banking Committee Chairman Tim Johnson.

The stock of JPMorgan Chase & Co. (NYSE:JPM) showed the biggest gain of 4.4 percent in seven weeks which is now trading at $35.53, however the gain could be only transient and will eventually drift down.