JPMorgan CIO Scores Home Run on UK RMBS

JPMorganJoe Mabel [CC BY-SA 3.0], via Wikimedia Commons

The embattled CIO unit at JPMorgan Chase & Co. (NYSE:JPM) which was rocked hard last year by major losses from the “London Whale” saga hasn’t missed on all of their trades. A close look at their holdings in their $360bil plus available for sale (AFS) portfolio reveals pretty substantial bets on UK & Dutch RMBS.

JPMorgan CIO Scores Home Run on UK RMBS

As of year end 2012, JPMorgan Chase & Co. (NYSE:JPM) held over $70bil in non-US non-agency MBS bonds. This is a sizable stake in the European structured products markets, something that Reuters reported on earlier last year. “Indeed, the CIO almost single-handedly resuscitated European RMBS market in 2009, buying huge chunks of new issues and providing repo agreements on others. As one fixed-income head said, when selling European structured finance, the JP Morgan CIO was “your first call, your second call, your third call and your fourth call.”>

With the dramatic rally in all spread products, non-agency MBS bonds have been big winners, and JPMorgan Chase & Co. (NYSE:JPM) looks to have began to trim their position during Q1 2013. Their 10-Q provides confirmation of this on Page 37 noting, “Securities decreased largely due to repositioning of the CIO AFS portfolio, which resulted in lower levels of non-U.S. residential mortgage-backed securities (“MBS”)”. Given the ZIRP environment and pressure on bank NIM’s, activity in the bank’s investment portfolio will continue to play a big role going forward. $684bil or 29% of the bank’s total assets are in cash, AFS securities, or secured financing as of 12/31.

By David Schawel, CFA of economicmusings

For exclusive info on hedge funds and the latest news from value investing world at only a few dollars a month check out ValueWalk Premium right here.

Multiple people interested? Check out our new corporate plan right here (We are currently offering a major discount)

About the Author

David Schawel, CFA, FSA
Currently work as a fixed income portfolio manager. Spent time in NYC in both investment banking and equity research. Current CFA charterholder.

Be the first to comment on "JPMorgan CIO Scores Home Run on UK RMBS"

Leave a comment

Your email address will not be published.