Though it has been reported on Thursday that the trading loss suffered by JP Morgan Chase, the nation’s largest bank, was $2 billion, the loss has surpassed the bank’s initial estimation by at least $1 billion in recent days.
Jamie Dimon, JP Morgan’s CEO, hinted that the loss could be doubled within the next few quarters when announcing the losses for the first time on Thursday. However, the process did not take more than four business days as other investors started taking advantage on the bank’s distress. Mr. Dimon added that the total paper trading losses would fluctuate depending on the everyday market condition.
Mr. Dimon acknowledged that he was ‘dead wrong’ when he did not pay attention to the concerns over the bank’s trading last month. He added that he did not know about the extent of the problem. He also emailed to the employees and arranged a conference call with stock analysts promising to probe the root of what happened and learn from his blunders.
The Federal Reserve has already involved in this matter scrutinizing the chance of growing losses and the original bet. They are also investigating whether the bank’s main investment office took any inappropriate risk regarding the depository institution.
In spite of this heavy loss, JP Morgan is still able to increase its stock dividend because of the solid state of the bank’s earnings and capital buffer.
However, the huge loss has shaken the Wall Street and incited the old debate over the limit of regulations to be exercised over such giant financial institutions. Though bank analysts ensured the stability of the bank, the mounting losses would have sure impact on the bank’s dividend. In fact, the impact has already taken place, as Mr. Dimon did not completely rule out the possibility of cutting dividend at the bank’s annual meeting in Tampa, Fla., on Tuesday.
At that meeting, though Mr. Dimon hoped that the dividend would not be cut, the shareholders were not reassured. A shareholder from Richmond, Va., John Lackey, who was present at that meeting, denoted Mr. Dimon’s response to be a vague one. He apprehended that the shareholders were going to suffer because of this loss. However, a spokesperson for the bank informed that no internal discussion was there regarding the issue of dividend cut.
Given on the bank’s original estimated loss of $2 billion, analysts are expecting that the earnings of the bank will reach to $4 billion in the next two quarters. They hope that the bank has the possibility to profit at least $2 billion even if the additional losses become double.
Many investors as well as analysts are hopeful that the bank will overcome this distress and make profit in the long run.