From news.com.auOriginal source
JPMORGAN Chase, the largest bank in the US, says it lost $US2 billion ($A2 billion) in a trading portfolio designed to hedge against risks the company takes with its own money.
The company's stock plunged more than six per cent in late electronic trading on Thursday after the loss was announced.
Other bank stocks, including Citigroup and Bank of America suffered heavy losses as well.
"The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," CEO Jamie Dimon told reporters. "There were many errors, sloppiness and bad judgment."
Dimon spoke in a hastily scheduled conference call with stock analysts. Reporters were allowed to listen.
Partly because of the $US2 billion trading loss, JPMorgan said it expects a loss of $US800 million this quarter for a segment of its business known as corporate and private equity. It had planned on a profit for the segment of $US200 million.
The loss is expected to hurt JPMorgan's overall earnings for the second quarter, which ends on June 30. Dimon apologised for the losses, which he said occurred since the first quarter, which ended March 31.
JPMorgan is trying to unload the portfolio in a "responsible" manner, Dimon said, to minimise the cost to its shareholders.
Among other bank stocks, Citigroup was down 3.2 per cent in after-hours trading, Morgan Stanley was down 2.9 per cent, and Goldman Sachs was down 2.7 per cent.
Read more: http://www.news.com.au/business/companies/jpmorgan-chase-admits-2b-trading-loss/story-fnda1bsz-1226352702722#ixzz1uVxwI1a2
This shows how much volatility still prevails on hedging side. Cannot imagine the worlds renowned institutions failing. It is very clear the US Government allowed the institution of this stature to freely do whatever they feel. It is merely a poor risk assessment. Lehman Brother is another example. Today in our country State Bank of India would have gone through similar turmoil had it not due to strong Government controls. We criticize Indian Government many time but should thank for strong controls. In that sense our financial institutions are in very strong and less volatile than US financial Institutions. Slow and steady India can rise provided we control corruption.
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