JP Morgan announced Thursday losses of $2 billion in corporate bond derivatives, after Wall Street Journal wrote, nearly a month ago, that several hedge funds bet against “huge” positions taken by a trader of the U.S. bank, named “London Whale”. For a credit institution which has gone through the financial crisis without reporting losses, the error is embarrassing, notes Reuters. The announcement hit the stock markets and the reputation of CEO Jamie Dimon, and JP Morgan. Futures on the bank’s shares fell 7% after U.S. stock market closure.
“It is very unfortunate,” said Dimon, apologizing in an impromptu conference with analysts. The official admitted that the losses are related to an article last month in the Wall Street Journal, on a trader, called “London Whale” or “White Whale”, who accumulated large financial positions on certain types of investments. Several hedge funds have bet against it. JP Morgan estimates that division with the portfolio affected by failed transactions will have to report a loss of $800 million for the quarter. Previously, the bank expected a profit of $200 million coming from those transactions. “It could cost an additional one billion dollars. It is risky and will be for several more quarters,” said Dimon.
In April, the Wall Street Journal reported that several players said that JP Morgan’s London trader, Bruno Iksil called “London Whale” had large positions in a market of derivatives, and many hedge funds have decided to bet against it.
According to market sources quoted by Bloomberg at the time, positions accumulated by Iksil could be around 100 billion dollars, but through a number of transactions he managed to influence a market of derivatives of some 10,000 billion dollars.
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