JPMorgan reports $2bn trading loss in failed hedging strategy
NEW YORK - JPMorgan Chase, the biggest bank in the US, has reported a shock $2 billion trading loss from a failed hedging strategy, spooking financial stocks across the globe Friday.
The loss, which has hit the reputation of the bank's CEO Jamie Dimon, is reportedly linked to a trader in JPMorgan Chase's London office.
According to Sky News, the employee's activities were part of the company's wider trading strategy.
Chief executive Jamie Dimon blamed "errors, sloppiness and bad judgement" for the loss.
"The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," he said late Thursday. The hedging strategy could cost the bank an additional $1 billion, he added.
JPMorganChase shares lost 9% as markets opened. The stocks of other banks, including Citigroup, Bank of America and Barclays, also suffered losses.
According to the Wall Street Journal, the losses stemmed from wagers gone wrong in the bank's Chief Investment Office, which manages risk for the New York company. The WSJ had reported last month that large positions taken in that office by a trader nicknamed "the London whale" had roiled a sector of the debt markets.
Dimon said the bank's mistake was "egregious" and "self-inflicted".
He added, "We will admit it, we will learn from it, we will fix it and we will move on."
According to BBC, the activities of Bruno Michel Iksil, a London-based JPMorgan trader known as the London Whale, is being focused on. Iksil reportedly made big bets on the financial markets as part of this hedging strategy.
The CIO is an arm of the bank used to make broad bets to hedge its portfolios of individual holdings.
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