Va a resultar que los derivados sí son peligrosos: JP Morgan pierde $2.000 millones en las últimas 6 semanas
J.P. Morgan Flags $2 Billion Trading Loss
By DAN FITZPATRICK and LIZ RAPPAPORT (Wall Street Journal)
J.P. Morgan Chase & Co. has taken $2 billion in trading losses in the past six weeks and could face an additional $1 billion in second-quarter losses due to market volatility, Chief Executive James Dimon said Thursday in a hastily arranged conference call after the market closed.
The losses stemmed from derivatives bets gone wrong in the bank's Chief Investment Office, a part of the corporate branch of the bank that manages risk for the New York company. The Wall Street Journal reported last month that large bets being made in that office had roiled a sector of the debt markets.
The loss is a black eye for the bank, which sailed through the crisis in better shape than most of its peers, and Mr. Dimon. It comes at a time when large banks are fighting efforts by regulators to rein in risky trading with measures such as the so-called Volcker rule.
J.P. Morgan shares fell $2.34, or 5%, to $38.40 in after-hours trading Thursday.
J.P. Morgan, the nation's largest bank by assets, said in its quarterly filing with regulators that a plan it has been using to hedge risks "has proven to be riskier, more volatile and less effective as an economic hedge than the firm previously believed."
Mr. Dimon said the so-called synthetic hedge, using insurance-like contracts known as credit-default swaps, was "poorly executed" and "poorly monitored." He said the bank has an extensive review underway of what went wrong, and that there were "many errors," "sloppiness" and "bad judgment" on the bank's part.
"We will admit it, we will fix it and move on," Mr. Dimon said. "This trading violates the Dimon principle."
The bank raised its estimate of losses at the unit to $800 million from the previous $200 million. Mr. Dimon said Thursday afternoon that the trading losses had been offset by $1 billion or so in gains on securities sales.
The Journal reported in April that hedge funds and other investors were making bets in the credit-default swap markets to take advantage of volatility that stemmed from the trades done by a London-based trader that named Bruno Michel Iksil who worked out of J.P. Morgan's Chief Investment Office.
Mr. Dimon said on the company's earnings call soon afterward that questions about the office's trading were "a complete tempest in a teapot."
"Every bank has a major portfolio," he said on the call April 13. "In those portfolios you make investments that you think are wise to offset your exposures."
Mr. Iksil, who has worked at J.P. Morgan since 2007, became bullish on the value of some corporate debt earlier this year. He sold protection on an index of these companies in the form of credit-default swaps called the CDX IG 9. Credit-default swaps are a type of derivative that act as insurance against a debt issuer defaulting. The instrument rises in value and ultimately pays out to the buyer if a debt issuer defaults.
His trading moved the index during the first quarter, traders said. A sign of how hot the trade is: The net "notional" volume in the index ballooned to $144.6 billion on March 30 from $92.6 billion at the start of the year, according to Depository Trust & Clearing Corp. data.
Mr. Iksil's group had roughly $350 billion of investment securities as of Dec. 31, according to company filings, or about 15% of the bank's total assets.
J.P. Morgan's loss comes in a period in which many other large U.S. banks posted placid trading results. Goldman Sachs Group Inc.'s trading operations had one losing day in the first quarter, in which it lost no more than $25 million, it said in a filing Thursday. Bank of America Corp. had a perfect trading quarter, with no losing days. Morgan Stanley had four days during which it suffered losses.
"This is yet another example of the need for the more than $700 trillion derivatives market to be brought into the light of financial regulation," said Dennis Kelleher, president of Better Markets, a liberal nonprofit focused on financial reform.
The Volcker rule is a part of the Dodd-Frank financial overhaul legislation passed in the U.S. in July of 2010. The rule, conceived of by former Federal Reserve Chairman Paul Volcker, prohibits financial institutions from using their own proprietary cash to take big bets in the markets. The rule is not yet in place, but many financial firms have cut back on businesses and activities, such as specific trading desk that use bank cash and investments in hedge funds and private equity funds, that seem to violate the rule.
Banks have been arguing broadly that the rule would cut liquidity and raise prices in markets, while many critics of the large banks have said the trading needs to be reined in more aggressively.
The trading loss "plays right into the hands of a whole bunch of pundits out there," Mr. Dimon said. "We will have to deal with that—that's life."
The losses could potentially expose bank employees to so-called clawback policies that permit the recovery of compensation in the event of a financial re-statement. Banks like J.P. Morgan have adopted such policies, which also are required under the Dodd-Frank financial overhaul law.
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En resumen, dice el presidente de JP Morgan que han perdido 2.000 millones de dólares haciendo trading con derivados en las últimas 6 semanas y que podrían ser 1.000 millones más.
