JPMorgan Chase & Co.'s (JPM: Quote) trading loss could reach as high as $9 billion, much more than the $2 billion loss estimated previously, the New York Times reported, quoting people briefed on the situation.
The bank revealed in early May that since March 31, its Chief Investment Office had hefty mark-to-market losses in its synthetic credit portfolio that proved to be riskier than expected. The group's bad bets cost the bank trading losses of more than $2 billion.
JPMorgan, through the CIO, makes broad bets to hedge portfolios of individual holdings. Dimon had accepted the losses as "egregious" and "self inflicted". He also said that the synthetic hedge, using contracts known as credit default swaps, was shoddily executed.
According to the report, the company's CEO Jamie Dimon had estimated at that time that the losses stemming from the bet on credit derivatives could double in the next few quarters. However, the losses have been increasing in the recent weeks as the firm has been unwinding its positions.
While JPM has said that it plans to leave the money-losing business, the exit is coming faster than imagined and the firm is already out of more than half of the trade.
In April, an internal report generated by the bank showed that in the worst-scenario, the losses could range between $8 billion and $9 billion. Now with more than half of that position sold, it is not clear what the reported losses will be.
The firm is expected to reveal part of the losses when it reports results next month. Appearing before Congress last week, Dimon maintained that taxpayers were at no risk of having to foot the bill, but he acknowledged that JPMorgan leadership has "let a lot of people down, and we are sorry for it."
JPM, which closed at $36.78 on Wednesday, is losing 2.8 percent in pre-market activity.
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by RTT Staff Writer
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