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Largest US bank loses $5.8bn

JPMorgan Chase & Co, the biggest US bank, said it had lost $5.8bn (€4.7bn) in 2012 from disastrous credit bets and that traders might have tried to conceal the extent of the losses earlier this year.

Of the trading losses, €3.6bn came in the second quarter. However, the bank still generated nearly €4bn of overall profit for the period.

JPMorgan’s disclosure about traders misstating the value of their positions was the first indication that the problems with the company’s bad trades may have extended beyond bad judgment about markets.

JPMorgan said it had cleaned up its chief investment office, which made the bad trades, and that any problems were isolated to the group. The trades may lose another €572m to €1.4bn, chief executive Jamie Dimon said.

In May, JPMorgan said bad derivatives bets on portfolios of corporate bonds had triggered about €1.65bn of paper losses, a figure that turned into €3.6bn of actual losses in the second quarter.

One trader in the investment office, Bruno Iksil, took big enough positions in the credit derivatives markets to earn the nickname “The London Whale”, He has left the bank, a source said.

Ina Drew, who headed the office, has also left, and offered to give back her pay for two years.

The bank said it had moved the bad trades from the investment office, which invests some of the company’s excess funds, to its investment bank.

The office will now focus on conservative investments, JPMorgan said.

JPMorgan made more mortgage loans, which helped results. Because it is experiencing fewer defaults and delinquencies than it expected, the bank reduced the amount of money it had previously set aside to cover bad loans. That reduction boosted profit by €1.7bn, before taxes.

JPMorgan expects to file new, restated first quarter results in the coming weeks. The bank found material problems with its financial controls during the period.

A host of regulators and agencies are already probing the trading mishap. They include the US Securities and Exchange Commission as well as the FBI.

— ReutersHome

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