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Massive Trading Loss Claims JPMorgan's Investment Chief

Massive Trading Loss Claims JPMorgan's Investment Chief
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JPMorgan Chase & Co. (JPM: Quote) on Monday announced the first casualty from the financial services giant's stunning trading loss of $2 billion. The company said Chief Investment Officer Ina Drew will retire, with Co-Head of Global Fixed Income Matt Zames named to replace her.

Meanwhile, Daniel Pinto, currently co-head of Global Fixed Income with Zames, will now become the sole head of the group. Pinto will also remain CEO of the company's Europe, Middle East and Africa region, based out of London.

Drew has served at JPMorgan for the past more than 30 years, and was currently heading the company's Chief Investment Office, which came under fire last week after it incurred hefty mark-to-market losses in its synthetic credit portfolio. She has run the risk-management group since 2005, with her office managing a portfolio worth more than $360 billion.

Reports earlier in the day said, three high-ranking executives are set to leave the company due to their direct involvement in the mistakes that led to the trading losses.

Drew was one of them, with the other two reportedly being 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.

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.

"Ina Drew has been a great partner over her many years with our firm. Despite our recent losses in the CIO, Ina's vast contributions to our company should not be overshadowed by these events," JPMorgan Chairman and CEO Jamie Dimon said in a statement.

According to media reports, Drew had repeatedly offered to resign after the magnitude of the loss became apparent in late April, but Dimon had refused to accept her resignation until now.

JPMorgan, through its Chief Investment Office, makes broad bets to hedge portfolios of individual holdings. JPMorgan recently said it is now repositioning CIO's synthetic credit portfolio.

JPMorgan said that since March 31, 2012, its Chief Investment Office has incurred hefty mark-to-market losses in its synthetic credit portfolio that has proved to be more riskier than expected. Dimon swiftly convened a surprise conference call on Thursday 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.

As of Thursday, the bank had lost $2.3 billion on a credit derivatives trade gone awry, and 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, WSJ report stated.

JPMorgan has now formed a team of senior executives from across our company to oversee and coordinate our firmwide response to the recent losses in the Chief Investment Office. The team will be led by Mike Cavanagh, CEO of our Treasury & Securities Services (TSS) group. Cavanagh was previously CFO of JPMorgan, and has great experience managing business and control functions around the company.

"It's important to remember that our company is very strong and well capitalized, with leading franchises across our businesses. We maintain our fortress balance sheet and capital strength to withstand setbacks like this, and we will learn from our mistakes and remain diligently focused on our clients, who count on us every day," Dimon added.

In Monday's regular trading session, JPM is currently trading at $36.00, down $0.96 or 2.58 on a volume of 24.93 million shares. In the past 52-week period, the stock has been trading in a range of $27.85 to $46.49.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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