The Banking and Strategy Initiative

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We are sorry we were wrong about JP Morgan | Banking insight

JP Morgan has finally done it. It seems the bank has fessed up to the CIO office strategy responsible for only 5% of the earnings of the company to wipe out its possible earnings for the quarter. The bank reported trading losses of $9B in the derivatives and much detail will have to await a clear report by the company or another fess up session for Jamie Dimon as the bank will report losses for Q2.

We were fairly certain that the bank would lose only $35-40 cents per share for each $2 B  loss ( a net loss of less than a $1 B) from the Division. In 2011 the bank reported a record Q2 revenue of $27 B and this year’s estimates before may were still $21 B keeping it under $100B for the year. 2011 Earnings were $1.27 for Q2 and the bank is likely ready for a good enough comeback on results day with goldman Sachs putting it on a conviction buy list at $0.60

The bank had $8 B in another portfolio in MTM gains it could possibly book to consolidate its financials and thus may still be able to report closer to $0.80 at the top end of the estimates or $3.2 B in profits. Of course the report of a $9 B loss in the portfolio means it could stay happy with jus reporting a larger loss for this quarter as well. The shares which recently began their upward journey after a consolidation were back at $34 in European trading.

The bank reported $17 B in profits in 2011, and just less than $5 B in the quarter ending June 2011

Loss making trades are a regular occurence on a trading desk though losss making days madea reappearance in Q1 this year because of the endless slowdown. Volume in Commodities has fallen off a cliff while volumes in Fixed Income are still down 20-30% on 2011 though almost 10% better than March

English: CEO of JP Morgan

English: CEO of JP Morgan (Photo credit: Wikipedia)

J P Morgan’s Total Equity is a humongous $175 B and should be able to withstand the $9B loss in the portfolio at the end of the day and that says a ton about the Dimon speak on JP Morgan being not too big to fail. The quick exit from the portfolio was made possible after an alumnus fronted trades and passed them over to JP Morgan

Jobless claims were already up before the morning trades at another 392000 revision to the week ended june 16 and 386,000 for this week.

The Bank’s $2.2T balance sheet will frequently be quoted from here for the $100 B in Derivatives exposure where the illiquid part of the portfolio could be exposed to a similar sheering effect on exits later as the Derivatives traded internationally would still not go through the Clearing house nor the ones in the US till the regulation comes online. Also despite more conservative valuation of these derivatives thay are not going to reflect in the Balance sheet assets in these edition of the Reforms.



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