New York - Losses from botched derivatives trades at JPMorgan hit $4.4 billion in the second quarter, an earnings report revealed on Friday.
The losses, which were linked to a Britain-based trading group that included a man dubbed “the London Whale,” were originally predicted to have cost the firm at least $2 billion.
The company announced that profits reached $5 billion in the second quarter, a drop of nine percent compared to the same period last year.
It also revised first quarter earnings down by $459 million.
In May the firm revealed that a scheme at the company's Chief Investment Office (CIO) designed to hedge risk had spectacularly backfired, opening the bank up to massive losses, reputation damage and legal problems.
The acknowledgment came amid scrutiny of the actions of one trader, Bruno Michel Iksil Ä nicknamed “the London Whale” because of the size of his massive bets.
Chief executive Jamie Dimon said Friday the firm had “significantly reduced” the risk from these bets, and announced $1
billion of gains had been clawed back as it sought to quickly unwind the positions.
The scandal was a humiliation for Dimon Ä one of Wall Street's best known titans Ä and for the bank, after it proudly came through the 2008 financial crisis in far better shape than its rivals.
Seeking to rebuild the firm's reputation, Dimon announced Friday that what remains of the dodgy portfolio had been transferred to the company's investment bank and that the CIO unit would, in future, stick to less risky trades.
“We have already completely overhauled CIO management and enhanced the governance standards within CIO,” he said in a statement. - Sapa-AFP