We knew it would be bad, now we’re getting to know just how bad.Ever since JP Morgan’s London Chief Investment Office revealed a $2 billion trading loss last month, Wall Street (and the world) have been waiting for the carnage to stop. After all, once the sharks on The Street found out the CIO was vulnerable there was no question that they would attack.
Now Bloomberg Businessweek has some research from the International Strategy & Investment Group Inc. on how all of this will impact Q2 numbers in general. Frankly, they’re not for those with weak stomachs. First of all, the ISI is estimating that the trading loss for the CIO in Q2 alone will amount to about $4.2 billion.
And there’s what this whole debacle about what will happen to the bank’s share price:
The pretax loss would help cut second-quarter earnings to 65 cents a share, a 30 per cent decline from an earlier estimate of 93 cents…
The loss will be “partially offset” by $2 billion in realised security gains, stronger mortgage-banking revenue and so-called debt-valuation adjustments…Excluding the trading losses, DVA and securities gains, Najarian (the ISI researcher) estimates second quarter operating earnings per share of 82 cents.
The stock has fallen 3.8% for the year. This isn’t going to help.