America's biggest bank, JPMorgan Chase says a bad trade has cost it 5.8 billion dollars (£3.75bn) this year, almost triple its original estimate, and raised the prospect that traders had acted improperly to conceal the blunder. "This has shaken our company to the core," CEO Jamie Dimon said.
The bank said all managers in the London office responsible for the bad trade had been dismissed without severance pay and that it planned to take back two years' worth of pay from each of those executives.
JPMorgan said it had lost 4.4 billion dollars (£2.8 billion) because of the trade from April until June, and its chief financial officer said the bank had lost an additional 1.4 billion dollars (£900 million) in the first three months of the year. Mr Dimon's original estimate of the loss from the bad trade, disclosed in a surprise conference call with Wall Street analysts on May 10, was two billion dollars (£1.3 bn).
The bank said an internal investigation, including emails and voice messages, had called into question the values that traders placed on certain bets, and that the traders may have been seeking to mask losses.
Mr Dimon told Congress last month that the trade was meant to hedge risk to the company and protect it in case "things got really bad" in the global economy. Instead, the trade has backfired and damaged the bank's reputation.
Speaking broadly about the trading loss today, Mr Dimon told analysts: "We don't take it lightly." He added: "We're not making light of this error, but we do think it's an isolated event."
The bank said that it was reducing its net income for the first quarter by 459 million dollars (£297m) because it had discovered information that "raises questions about the integrity" of values placed on certain trades.
Mr Dimon said the bank had closed the division of the bank responsible for the bad trade and moved the remainder of the trading position under its investment banking division.
Just three months ago, JPMorgan was viewed as the top American bank, guided by Mr Dimon's steady hand. Since the disclosure of the trading loss, however, that reputation has been eroded. Mr Dimon, who originally dismissed concerns about the bank's trading as a "tempest in a teapot," appeared before Congress twice to apologise and explain himself, and several government agencies have launched investigations. JPMorgan has lost about 15% of its in market value since the loss came to light.
The Wall Street Journal reported today that three other employees of the bank tied to the trade, including one who was known as the "London whale," had left the bank.
www.jpmorganchase.com/ (JPMorgan Chase)