Well, this is terribly embarrassing: JPMorgan, the largest bank in the US, literally wiped seven per cent off their stock in a few hours with this blunder. The investment bank has blamed “sloppiness and bad judgment” for the enormous error.

The bank now says it expects a loss of $800 million this quarter for a segment of its business known as corporate and private equity, partly attributed to the $2 billion loss.

It had expected a profit of $200 million for the segment.

JPMorgan managed to lose the $2 billion in the past six weeks through a trading portfolio designed to hedge itself against the risks it takes with its own money.

The division is designed to help control the bank’s exposure to risk in the financial markets, and invest excess money in its corporate treasury.

Ironic, that.

After the shock announcement was made, other bank stocks, including Citigroup and Bank of America, suffered heavy losses too.

CEO, Jamie Dimon:

The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought. There were many errors, sloppiness and bad judgment. We will admit it, we will learn from it, we will fix it, and we will move on.

Dimon partly blamed the loss on the “London whale”, a single JPMorgan trader in London, who was making such large trades that he was moving prices in a $10 trillion market back in April.

Dimon admitted the problem was also broader, and said the company had “acted too defensively,” and should have looked into the division more closely.

Dimon apologised for the losses, and said JPMorgan is trying to unburden itself from the portfolio in a “responsible” manner, so as to minimise the cost to its shareholders.

[Source: AlJazeera]