Three high-ranking executives at JPMorgan Chase & Co.'s (JPM: Quote) chief investment office are expected to leave the company as early as Monday after the bank revealed a trading loss of $2 billion last Thursday, according to media reports over the weekend.
The three executives will reportedly leave the company due to their direct involvement in the mistakes that led to the losses.
The executives are said to be Chief Investment Officer Ina Drew, who has run the risk-management group since 2005, Achilles Macris, who was in charge of the London-based operation that placed the questionable trades, and trader Javier Martin-Artajo, who was a managing director on Macris' team.
Drew, aged 55, is one of two women on the operating committee of JP Morgan. Her office manages a portfolio worth more than $360 billion.
According to media reports, Drew had repeatedly offered to resign after the magnitude of the loss became apparent in late April, but JPMorgan CEO Jamie Dimon had refused to accept her resignation until now.
On Thursday, shares of JPMorgan slid after the company disclosed hefty losses in its synthetic credit portfolio. The bank said that since March 31, 2012, its Chief Investment Office or CIO has had hefty mark-to-market losses in its synthetic credit portfolio that has proved to be more riskier than expected.
JPMorgan, through the CIO, makes broad bets to hedge portfolios of individual holdings. JPMorgan said it it will reposition the CIO's synthetic credit portfolio. CEO Dimon swiftly convened a conference call in which he termed the losses as "egregious" and "self inflicted."
Dimon said the estimated $1 billion second-quarter loss stemming from erratic markets is in addition to $2 billion trading losses it took in the last six weeks. Dimon added that the synthetic hedge, using contracts known as credit default swaps, was shoddily executed.
As of last Thursday, the bank had lost $2.3 billion on a credit derivatives trade gone awry, but that figure grew by about $150 million on Friday, the Wall Street Journal reported.
Executives are prepared for another $1 billion of possible losses in the current second quarter from these positions, as well as another $1 billion of potential losses over the next year or so, according to the WSJ report.
Dimon has said the losses came from trading in so-called credit derivatives and was designed to hedge against financial risk, not to make a profit for the bank.
Another executive likely to depart from the company is said to be trader Bruno Michel Iksil, nicknamed the "London Whale" for the big positions he took in credit markets on behalf of the chief investment office.
On Tuesday, Dimon is likely to face further scrutiny before shareholders at the annual shareholder meeting in Tampa, Florida. He will face a vote calling on the bank to adopt an independent chairman. Dimon is both CEO and chairman of JPMorgan.
JPM closed Friday's trading at $36.96, down $3.78 or 9.28 percent on a volume of 217.20 million shares.
| || |
| To receive FREE breaking news email alerts for JPMorgan Chase & Co. and others in your portfolio|
by RTT Staff Writer
For comments and feedback: firstname.lastname@example.org