JP Morgan Chase announced second quarter (Q2) profit of US$5bn on revenue of $22.9bn. The results were marred by credit trading losses of $4.4bn in its London offices resulting from bad derivatives trades in its chief investment office (CIO). These resulted from the nefarious activities of the so-called ‘London Whale’, trader Bruno Iksil, who has since left the bank.
The $4.4bn loss resulting from Iksil’s activities was more than double the initial estimate made by the bank’s chief executive officer (CEO) Jamie Dimon, when he first announced the loss on 10 May. However, recent reports had suggested an even higher upward revision to as much as $9bn might be the real impact of Iksil’s profit-seeking ‘hedges’.
JP Morgan also revised its Q1 income downwards by $459m and said that some of its traders “may have been seeking to avoid showing” the full extent of their losses, which had resulted from “a material weakness” in internal controls. The high profits announced today would have been significantly higher but for the London office.
Dimon explained that the bank had reviewed its CIO losses and believed that the bad trades were restricted to the unit. It was reported earlier this week that it will seek to reclaim millions of dollars from individuals responsible for the trading losses, beginning with its former CIO head Ina Drew who has also left the bank.