Bloomberg is out with a deep dive on how JP Morgan’s Chief Investment Office (CIO) got to be a much riskier trading operation and how it’s dealing with the fallout from last week’s revelation that its London office is facing a $2 billion trading loss caused by mismanaged hedges.Since then, the head of the CIO, Ina Drew, has stepped down and she probably won’t be the last to leave the bank.
This is obviously a perfect picture of what damage control looks like, but lets not forget that the bank is still vulnerable. They are still working on closing their positions, and that takes time (and some ‘Navy Seals’)
So in the meantime, Bloomberg reports that the trades are still losing money. That’s no surprise, it’s just that the number is staggering — JP Morgan could lose an additional $1 billion as other investors capitalise on its weakness.
The losses have mounted since they were revealed last week, according to one person with knowledge of the bank’s internal deliberations. The firm’s investment bank is now managing the money-losing trades to minimize risk, and the leadership is still confident the maximum downside is about $1 billion more than the $2 billion loss disclosed last week, this person said, speaking on the condition of anonymity because he wasn’t authorised to speak for the company.
People trying to monitor the London office’s devastating trades think that Bruno Iksil (the trader known as ‘the London Whale’) may have have built a position totaling as much as $100 billion in contracts in one index. JP Morgan puts that number at tens of billions.
In short, this could get worse before it gets better.