U.S. banking giant JPMorgan Chase, on Thursday, said it had lost $2 billion on derivatives since March in what chief executive Jamie Dimon called a ‘flawed' and ‘poorly executed' trading operation.
In an unscheduled conference call, Mr. Dimon also said the bank could face another $1 billion in losses through the end of June due to market volatility.
“It could easily get worse this quarter,'' he told analysts and journalists.
The loss came over the past six weeks in the New York bank's risk management unit, the Chief Investment Office, and involved trading in credit default swaps, a so-called ‘synthetic hedge'.
The CIO trades bank assets with the aim of hedging against other risks the bank takes in its own investments.
But Mr. Dimon called the CIO's strategy ‘poorly reviewed, complex, poorly executed.'
“These were egregious mistakes,'' Mr. Dimon said. “They were self-inflicted and this is not how we want to run a business.''
JPMorgan shares fell nearly seven per cent in after-hours trade.
The losses are a humiliation for Mr. Dimon — one of Wall Street's best known titans — and for the bank, after it proudly came through the 2008 financial crisis in far better shape than its rivals.
Then, the collapse of the market in mortgage derivatives punched a giant hole in banks' balance sheets and plunged the world's largest economy into the worst recession in a generation, costing millions of jobs.
As recently as last month, JPMorgan executives told investors they were “very comfortable'' with positions held by the bank, raising questions about how much was known by senior management and when.
Keywords: JPMorgan Chase