The biggest US bank JP Morgan Chase divulged on Thursday that it has lost more than $2 billion in trading due to complex investments made by its traders, the news reports said.
After accounting for other gains, the losses at its chief investment office (CIO) are estimated to come in at $800 million in the second quarter.
According to the global bank’s chief executive, James Dimon, the loss could be as big as $1 billion. The shares of JP Morgan slipped 6% after hours, with stocks of other bank stocks following.
Post market close, other international investment banks like Citigroup, Bank of America and Goldman Sachs also suffered heavy losses in the electronic trading.
Mr. Dimon said, the strategy taken at its CIO had been riskier, more volatile and less effective, then believed previously. The trading loss is likely to hurt JP Morgan’s overall earnings in the quarter.
It will also come as an embarrassment to the bank. The trading loss ruins the status of the bank which came through the financial crisis better than most peers. It comes at a time when large banks are fighting efforts by regulators to rule in the risky trading.
The losses will expose bank staff to so-called claw back policies that permit the recovery of compensation in the event of a financial restatement, the bank said.
JP Morgan Chase & Co is an American multinational banking corporation of securities, investments and retail. The company provides financial services and is the largest bank in the United States by assets and market capitalization.