It’s fast becoming one of the most embarrassing financial cock-ups in City history. JPMorgan trader Bruno Iksil, nicknamed the ‘London whale’ (such was his impact on the market) lost $2bn in just six weeks of trading last month. And the black hole on the balance sheet just keeps on spreading, with the estimated final bill hitting $7bn (£4.4bn).
Traders have been reporting ‘slanging matches’ in the firm's London and New York offices as the full extent of the taint is uncovered. One head has already rolled: chief investment officer Ina Drew retired four days after the losses were made public on a regulatory filing, ending her 30-year run as one of the most powerful women on Wall Street. Her replacement, Matt Zames, is now tasked with gradually unwinding the complex series of trades, hedged against 125 corporate bonds. The size of the bets boggles the mind: London whale’s trades totaled $100bn (£63bn).
JPMorgan last night suspended its share buy-back programme, as it now needs to hang on to the $15bn cash to meet new rules on the capital banks must hold. It will keep paying a dividend, however (presumably to appease all those investors who were filing lawsuits last week).
The embarrassment is heightened by the fact that these losses arose as part of an effort to minimise the risk on some of the bank's other investments. Oops.
CEO Jamie Dimon has refused to keep a public tally of JPMorgan’s losses, but has called the rogue trading ‘an isolated event’, saying that he expects the loss to be ‘something we don't have to talk about by the end of the year.’ With billions wiped off the balance sheet and the Commodity Futures Trading Commission now investigating its losses, that sounds like wishful thinking…