Buffett: CIO Debacle Hasn’t Affected JPMorgan’s Reputation for Me

Berkshire Hathaway B shares Warren BuffettBy Mark Hirschey (Work of Mark Hirschey) [CC BY-SA 2.0], via Wikimedia Commons

Buffett: CIO Debacle Hasn't Affected JPMorgan's Reputation for Me

Billionaire investor Warren Buffett says that the reputation of JPMorgan Chase & Co. (NYSE:JPM) is still intact for him. He was speaking on Bloomberg Television’s “In the Loop With Betty Liu” after the banking giant announced a $4.4 billion trading loss on derivatives. “I’ve had enough mistakes of my own that I’m very forgiving when something like that happens,” he added. When Liu asked him whether the blunder would affect the reputation of America’s biggest bank, Buffett simply said, “Not with me.”

The chairman of Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)  has a personal stake in JPMorgan Chase & Co. (NYSE:JPM). Buffett has a strong confidence in the abilities of JPMorgan’s CEO Jamie Dimon. During an interview with CNBC, Buffett called Dimon “one of the best bankers in the world.” Dimon had publicly apologized to shareholders after the trading fiasco in JPMorgan’s London office was disclosed in May.

The bank announced its second quarters earnings today. Though JPMorgan earned $5 billion profit, it reported $4.4 billion trading loss at chief investment office (CIO)’s synthetic credit unit, which is way too higher than the previously estimated loss of $2 billion. The bank said in its official statement that CIO would no longer be trading the synthetic credit portfolio. The head of CIO Ina Drew had immediately resigned from the job after the debacle was disclosed in May.

There were concerns among investors and analysts that  bank traders in London might have lied about their deteriorating bets in an attempt to reduce the losses. So JPMorgan has decided to restate first quarter earnings.

Despite the hefty trading loss of $4.4 billion, the bank reported  $5 billion profit or $1.21 earnings per share, which is much better than estimated $0.90 per share. It speaks volumes about the bank’s core strength, and Buffett seems to be right.

About the Author

Vikas Shukla
Vikas Shukla has a strong interest in business, finance, and technology. He writes regularly on these topics. - He can be contacted by email at vshukla@valuewalk.com