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Entries in JPMorgan Chase (27)

Wednesday
Jan162013

JPMorgan Chase's Fourth Quarter Profit Rises 53% from 2011

STAN HONDA/AFP/Getty Images(NEW YORK) -- America’s most highly valued bank, JPMorgan Chase, bounced back from last year’s embarrassing trading loss with a strong fourth quarter.

On Wednesday, it reported a quarterly profit of $5.7 billion -- an increase of $2 billion, or 53 percent, from the previous year.  The bank's revenue also shot up in the fourth quarter, rising by 10 percent from 2011 to $24.4 billion.

"The firm's results reflected strong underlying performance across virtually all our businesses for the fourth quarter and the full year, with strong lending and deposit growth," JPMorgan Chase CEO Jamie Dimon said in a statement.

Dimon, meanwhile, had his compensation cut in half from $23 million to $11.5 million as a result of the bank's more than $6 billion "London Whale" trading loss.

Copyright 2013 ABC News Radio

Thursday
Jul262012

JPMorgan Chase to Pay $100M for Hiking Credit Card Fees

Peter Foley/Bloomberg via Getty Images(SAN FRANCISCO) -- Under a court settlement filed this week in San Francisco, JPMorgan Chase will pay $100 million to credit card holders who saw their minimum monthly payments hiked from 2 percent to 5 percent between 2008 and 2009.

A class-action lawsuit, filed three years ago, argued that the increase was improper, and that it violated commitments made by the bank to induce cardholders to switch their balances to Chase from other lenders.

Those commitments, says Howard Dvorkin, CPA, a founder of ConsolidatedCredit.org, included interest rates that were supposed to remain “fixed” until balances were paid in full.

“They said come to us and we’ll fix your interest rate for the life of the loan, until it’s paid off,” says Dvorkin.

In 2008 and 2009, however, the bank raised rates, triggering an increase in late payment penalties from hard-squeezed borrowers.  Late payment also could trigger a penalty interest rate of 29.29 percent.

“Your promotional rate that got you to the bank, they didn’t honor,” says Dvorkin.  “A client would go delinquent, and triggering penalty and late fees, and your interest rate could go to 30 percent.  Do I think this was part of an evil master plan?  No.  Do I think it was aggressive?  Yes.  And now they’re paying the penalty for it.”

Chase’s view, according to the proposed settlement, which still must be approved by a judge, was that raising payment minimums was “a reasonable and sensible response to unprecedented economic turmoil and impending regulatory changes” -- meaning the credit card reform act of 2009.

The proposed settlement includes a complex allocation plan for divvying up the $100 million between members of the class.  Class members get a flat payment of $25 plus a pro-rata share of the settlement fund (after legal fees and costs have been deducted).  The plan gives $72 as a representative amount.

“At the end of the day,” says Dvorkin, “it’s the lawyers who make the money.”

A spokesperson for JPMorgan Chase, contacted by ABC News, declined to comment on the settlement.

Copyright 2012 ABC News Radio

Friday
Jul132012

JPMorgan Reports $5B Profit, Expands Trading Loss

Peter Foley/Bloomberg via Getty Images(NEW YORK) -- JPMorgan Chase, still reeling from trading losses in its investment unit, reported a second-quarter profit of $5 billion on Friday.

Investors were less interested in the largest U.S. bank’s net income than the total losses from bad hedged bets in their chief investment office. They announced that the loss this quarter from that the trade was $4.4 billion; estimates had the loss in the range anywhere from $2 billion to $9 billion.  The bank has yet to make clear if there is a possibility of incurring more loss.

[CLICK HERE TO SEE JPMORGAN'S EARNINGS REPORT]

In a surprise announcement in a Securities and Exchange Commission filing ahead of the earnings report, JP Morgan revised its first-quarter earnings to show an additional loss because traders in the CIO unit were misrepresenting the extent of the losses.

According to the SEC filing, “… the firm has recently discovered information that raises questions about the integrity of the trader marks and suggests that certain individuals may have been seeking to avoid showing the full amount of the losses in the portfolio during the first quarter.”

Jim Sinegal, director of financial services research at Morningstar, an investment firm, said the most important discovery from the earnings release is whether the loss is in line with what the company has recently described; that is, whether the problem has been contained.

CEO Jamie Dimon was previously criticized for describing the trading loss as a “tempest in a teapot,” before he later acknowledged that the losses were greater than he was told by his management. His chief investment officer, Ina Drew, resigned in May.

“What Jamie Dimon has done well is under promise and over deliver,” Sinegal said.  “Not only has this escaped his eye as a risk manager -- but to the extent that it got out of hand more than once, if it turns out even bigger than that, you have to wonder if he has as much control as everyone believes him to have.”

“A loss of $5 billion or more would surprise me,” Sinegal said. “I think you would have to reassess your opinion of Dimon and all top risk managers.  It is generally well accepted that JPMorgan has done the best job managing risk of the large banks.”

Copyright 2012 ABC News Radio

Thursday
Jun282012

Report: JPMorgan Chase Trading Loss Could Rise to $9 Billion

Peter Foley/Bloomberg via Getty Images(NEW YORK) -- Trading losses at JPMorgan Chase may be much bigger than previously thought.

Citing people familiar with the matter, The New York Times reports the bank's losses may have ballooned to as much as $9 billion.  Previous reports had the estimate at $2 billion and counting.

The sources tell the newspaper "the red ink has been mounting in recent weeks, as the bank has been unwinding its positions."

In May, JPMorgan traced its loss to losing bets on "synthetic credit securities" -- the same kind of instruments that nearly led to a collapse of the financial system in 2008, prompting a nearly $1 trillion government bailout.

The mishandled trade has added to the debate over bank regulations, and whether some "too big to fail firms" are making very risky trades.

Copyright 2012 ABC News Radio

Tuesday
Jun192012

Jamie Dimon Defends Wall Street on Capitol Hill

Scott Eells/Bloomberg via Getty Images(WASHINGTON) -- JPMorgan Chase CEO Jamie Dimon was in the hot seat again today after the $2 billion and counting loss disclosed last month from theirchief investment office.

Dimon testified before the House Financial Services Committee on Tuesday, where lawmakers are worried that risky trading could lead to another taxpayer-funded bailout of the "too big to fail" banks, including JPMorgan.

Rep. Barney Frank, D-Mass., Rep. Maxine Waters, D-Calif., Rep. Carolyn Maloney, D-N.Y., Rep. Patrick McHenry, R-N.C., were among those who grilled Dimon about everything from jobs, Dimon's salary and, of course, Dodd-Frank Act's financial regulation.

"Parts of Dodd-Frank we supported, parts of Dodd-Frank we didn't support," Dimon said in response to a question by McHenry about whether he supported the legislation signed into law in July 2010.

"I remind people we do have the best capital markets in the world," Dimon said.

Frank asked Dimon for his thoughts about derivative trade exemptions to which Dimon explained that JPMorgan's trades were cleared. The long-standing representative from Massachusetts also asked Dimon about a proposal to cut funds from the Commodity Futures Trading Commission (CFTC). He answered that he has "never looked at the CFTC budget" and could not answer the question.

Frank said he was "disappointed" by Dimon's responses.

In another question from Frank, Dimon said he did not know if he would be the subject of potential clawbacks by the board of directors who determines his compensation.  "I can't tell my board what to do," Dimon told Frank.

Dimon's four-page prepared remarks for Tuesday were nearly identical to those of last week before the Senate committee.

"We will lose some of our shareholders' money - and for that, we feel terrible - but no client, customer or taxpayer money was impacted by this incident," he said in his prepared remarks both last week and on Tuesday.

Dimon told the committee it would be more effective to discuss financial rule-making behind closed doors, not during a hearing, and "not pretend they're either for Volcker or against Volcker."

Regulation is not "binary" but "complicated," he stressed several times.

Copyright 2012 ABC News Radio

Wednesday
Jun132012

JPMorgan Chase CEO Jamie Dimon: Risky Trades Misunderstood

Andrew Harrer/Bloomberg via Getty Images(WASHINGTON) -- JPMorgan Chase CEO Jamie Dimon told the Senate Banking Committee that the risky trades that led to billions in losses were taken by traders who didn't understand the risks. He called the bad trades an "isolated event" that won't happen again.

The CEO said he was "dead wrong" when he dismissed a trading loss from the London office as a "tempest in a teapot" before he learned the bank made a $2 billion bad bet. He hinted that those responsible may have pay taken back from them.

Minutes before Dimon, 56, testified before committee, one audience member delayed the hearing on Capitol Hill in Washington, D.C., calling Dimon a "criminal" and "crook," saying that small businesses can't get loans. A group of protesters chanting, "Stop foreclosures now," were escorted outside the Dirksen Office Building by Capitol Hill police.

Once the hearing began, Dimon told the committee he was misinformed about a strategy with a synthetic credit portfolio that was meant to hedge risks, but "ultimately resulted in even more complex and hard-to-manage risks." This led to trades on May 10 that may actually have led to losses as high as $5 billion, according to the Wall Street Journal. A week later, the FBI said it opened a routine inquiry about the trading losses.

In a conference call on April 13, he peremptorily dismissed worries over the trades made by JPMorgan's London office as "a tempest in a teapot."

"When I had made that statement, I was dead wrong," Dimon told the committee. He said he had "the right" to rely on information from the company's chief investment officer, Ina Drew, and her office in London. "I was assured by them they thought this was an isolated small issue and that it was not a big problem," Dimon said.

His lightning career has taken him from American Express to Citigroup (which he formed with his then-mentor, Sandy Weil, in 1998), to Banc One, where he became CEO in 2000. In 2004, when Banc One was purchased by JPMorgan, he became president of the combined company, then later CEO. On his watch, JPMorgan has grown to be the biggest U.S. bank in terms of market capitalization and assets under management.

Risky trades aren't the biggest risks JPMorgan Chase faces, Dimon told the committee. "Dramatically rising interest rates and a global type of credit crisis," he said. "Those are the two biggest risks we face."

Sen. Charles Schumer, D-N.Y., asked Dimon to explain why the company's own risk committee did not catch the risky strategy that led to the loss and what other risk committees could do alternatively.

"I think it would have been hard to capture it if management didn't capture it," he said. "To the extent that we were misinformed, they were misinformed..."

"It's hard to have the unrealistic expectation to capture things like this," he said.

Dimon said "the financial system is safer today than it was in '07," but he was hesitant to say that was due to regulations.

When Sen. Bob Corker, R-Tenn., pressed Dimon if regulatory systems have made systems safer, Dimon said, "I don't know."

In his prepared remarks, made available before the hearing, Dimon defended JPMorgan's performance, even while admitting that the bank felt "terrible" for having lost some of its shareholders' money.

"We will lose some of our shareholders' money - and for that, we feel terrible - but no client, customer or taxpayer money was impacted by this incident," he said.

Though Dimon since has castigated himself publicly for having misjudged the situation, shareholders, analysts and politicians have said they cannot understand how the normally indefatigable Dimon could have let a mistake this size occur.

Dimon insists that the full magnitude of the London trading risk was not known to him, and that he remained ignorant of key details until it was too late to prevent the loss. That surprises one of his colleagues from the 1990s, who thinks of Dimon as the ultimate detail guy: "What surprises me most in this whole debacle is that he really was a detail guy. Nothing slipped by him. My guess is he may have delegated too much and not have known. If he had, I don't see how it could have reached this level of loss."

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Copyright 2012 ABC News Radio

Wednesday
Jun132012

Jamie Dimon's Senate Testimony Puts Career on Line

Scott Eells/Bloomberg via Getty Images(WASHINGTON) -- When Jamie Dimon, head of JPMorgan Chase, appears Wednesday before the Senate Banking Committee to field questions about his bank's $2 billion-and-climbing trading loss, people who know him well say they have little doubt how he will respond.

He will display, they predict, the same traits -- attractive and not-so -- that have taken him, at age 56, to the pinnacle of the banking industry.

His lightning career has taken him from American Express to Citigroup (which he formed with his then-mentor, Sandy Weil, in 1998), to Banc One, where he became CEO in 2000.  In 2004, when Banc One was purchased by JPMorgan, he became president of the combined company, then later CEO.  On is watch, JPMorgan has grown to be the biggest U.S. bank in terms of market capitalization and assets under management.

In his prepared remarks, made available before the hearing, Dimon defended JPMorgan's performance, even while admitting that the bank felt "terrible" for having lost some of its shareholders' money.

As for what Dimon may say in response to questions, one woman who advised him early in his career predicts, "He will speak from the heart."  He'll be candid, she says, forthright.  He won't mince words. "He's not coachable, not in the sense that he will listen to experts and then do what they tell him to do.  He's his own man.  I know that from my direct experience with him."

Like other former Dimon colleagues interviewed for this story, she requested to be nameless.

Patricia Crisafulli, one of Dimon's biographers, says, "He's known as a straight talker -- not just forthright but honest."  Her book, The House of Dimon: How JPMorgan's Jamie Dimon Rose to the Top of the Financial World depicts him as nothing if not direct.  With Dimon, Crisafulli writes, what you see is what you get.

That sometimes can include cocksureness, petulance and temper.

"I think very highly of him," says a Dimon colleague from the 1990s.  "There's no bulls**t about him.  People respect that.  But he's blunt to a fault -- rough around the edges.  Sometimes, he's too smart for his own good, finishing sentences for you, even when what he said wasn't what you had in mind.  He jumps to conclusions."

He jumped to a false one on April 13, when in a conference call with JPMorgan analysts, he peremptorily dismissed worries over trades made by JPMorgan's London office as "a tempest in a teapot."  That tempest, the Wall Street Journal reports, now stands to lash the bank with losses of $5 billion maybe more.

Dimon insists that the full magnitude of the London trading risk was not known to him and that he remained ignorant of key details until it was too late to prevent the loss.  

That surprises his 90s colleague, who thinks of Dimon as the ultimate detail guy: "What surprises me most in this whole debacle is that he really was a detail guy.  Nothing slipped by him.  My guess is he may have delegated too much and not have known.  If he had, I don't see how it could have reached this level of loss."

Says his former advisor, "He has a maniacal desire to have his hands on all the details. My guess is, he's truly beating himself up for what went wrong."

Copyright 2012 ABC News Radio

Tuesday
Jun122012

JPMorgan CEO to Testify Before Senate Committee: Traders Didn’t Understand Risk?

Scott Eells/Bloomberg via Getty Images(WASHINGTON) -- Jamie Dimon, chairman & CEO of JPMorgan Chase & Co., will testify Wednesday before the Senate Banking Committee on the now infamous trading loss that has reached about $3 billion.  A preview of the testimony reveals that he will again apologize for letting “a lot of people down,” but will say that traders in Chief Investment Unit “did not have the requisite understanding of the risks they took.”

He defends the bank’s multi-billion-dollar loss, saying:

  • CIO (the JPM unit where the loss happened) did something they shouldn’t have done and “as a result, we have let a lot of people down, and we are sorry for it.”
  • We have a new team handling things differently, reducing “the probability and magnitude of future losses.”
  • Adding that “while we can never say we won’t make mistakes -- in fact, we know we will -- we do believe this to be an isolated event.”
  • Further, “our fortress balance sheet remains intact.”

In his prepared remarks, Dimon also answers in his own words -- what happened and what went wrong.

What Happened? In December 2011, as part of a firmwide effort in anticipation of new Basel capital requirements, we instructed CIO to reduce risk-weighted assets and associated risk. To achieve this in the synthetic credit portfolio, the CIO could have simply reduced its existing positions; instead, starting in mid-January, it embarked on a complex strategy that entailed adding positions that it believed would offset the existing ones. This strategy, however, ended up creating a portfolio that was larger and ultimately resulted in even more complex and hard-to-manage risks. This portfolio morphed into something that, rather than protect the Firm, created new and potentially larger risks. As a result, we have let a lot of people down, and we are sorry for it.

What Went Wrong? We believe now that a series of events led to the difficulties in the synthetic credit portfolio. Among them: CIO’s strategy for reducing the synthetic credit portfolio was poorly conceived and vetted. The strategy was not carefully analyzed or subjected to rigorous stress testing within CIO and was not reviewed outside CIO. In hindsight, CIO’s traders did not have the requisite understanding of the risks they took. When the positions began to experience losses in March and early April, they incorrectly concluded that those losses were the result of anomalous and temporary market movements, and therefore were likely to reverse themselves. The risk limits for the synthetic credit portfolio should have been specific to the portfolio and much more granular, i.e., only allowing lower limits on each specific risk being taken. Personnel in key control roles in CIO were in transition and risk control functions were generally ineffective in challenging the judgment of CIO’s trading personnel. Risk committee structures and processes in CIO were not as formal or robust as they should have been. CIO, particularly the synthetic credit portfolio, should have gotten more scrutiny from both senior management and the firm wide risk control function.

It’s sure to be an interesting day for Dimon, who will be the sole witness at the hearing.

Here is an excerpt of Chairman Tim Johnson, D-S.D., prepared remarks for the hearing titled “A Breakdown in Risk Management: What Went Wrong at JPMorgan Chase?”:

“Today marks the two-month anniversary of Mr. Dimon’s ‘tempest in a teapot’ comments where he downplayed concerns from initial media reports of the company’s Chief Investment Office trades.  We later learned, however, it was an out-of-control trading strategy with little to no risk controls that cost the company billions of dollars.

I have said before, no financial institution is immune from bad judgment.  In Mr. Dimon’s own words, he later explained, ‘We made a terrible egregious mistake.  There’s almost no excuse for it…. We know we were sloppy.  We know we were stupid.  We know there was bad judgment…. [I]n hindsight, we took far too much risk.  The strategy we had was badly vetted.  It was badly monitored.  It should never have happened.’

So what went wrong? For a bank renowned for its risk management, where were the risk controls?  How can a bank take on ‘far too much risk’ if the point of the trades was to reduce risk in the first place?  Or was the goal really to make money? Should any hedge result in billions of dollars of net gains or losses, or should it be focused solely on reducing a bank’s risks?  As the saying goes, you can’t have your cake and eat it too.

Again it has been two months since he first publicly acknowledged the trades, so I expect Mr. Dimon to be able to answer tough, but fair questions. A full accounting of these events will help this Committee better understand the policy implications for a safer and stronger financial system going forward.”


Copyright 2012 ABC News Radio

Wednesday
May162012

JPMorgan Faces New Lawsuits Over Bets Gone 'Horribly Wrong'

Chris Hondros/Getty Images(NEW YORK) -- JPMorgan Chase now faces two new lawsuits from shareholders angry over the bank’s two billion dollar trading loss.  The suits, filed in federal court in New York, allege JPMorgan misled investors about the bet that went bad.

“Defendants misrepresented the losses and risk of loss to the Company arising from massive bets on derivative contracts,” plaintiff Saratoga Advantage Trust said in court papers.  “These derivative bets went horribly wrong.”

Chief Executive Jamie Dimon has said the bank made “egregious” and “self-inflicted” mistakes, words that may come back to haunt him in court.  

“We believe that he made false and misleading statements and omissions quite frankly,” Bruce Ventimiglia, CEO of Saratoga Advantage Trust, told ABC News.

The lawsuit names Dimon and Chief Financial Officer Douglas Braunstein.  

Dimon and Braunstein knew, or could not reasonably have been unaware of, the magnitude of losses being incurred by JPMorgan,” court records said.
 
When JPMorgan disclosed the loss last week the bank said it resulted from a failed hedging strategy meant to insulate its portfolio from losses.  Ventimiglia does not buy it.

“They have mislabeled what they were doing.  They describe what they were doing as hedging strategies.  We think they were outright bets,” he said.  

JPMorgan Chase declined to comment on the lawsuits.  The bank has also declined to give specifics about the trades, but Saratoga Advantage Trust believes “these wagers may have reached close to $100 billion dollars in size.”  

“These types of derivatives trades are at the center of the 2008 financial crisis,” Ventimiglia said.  “The proper disclosure of what these banks are doing is critical to investors.”

Copyright 2012 ABC News Radio

Tuesday
May152012

JPMorgan Shareholders Approve Pay Packages After $2B Trading Loss

Peter Foley/Bloomberg via Getty Images(NEW YORK) -- Despite the bank's $2 billion trading loss, JPMorgan Chase CEO Jamie Dimon still has the support of the company's stockholders. At the company's annual meeting Tuesday, shareholders voted to approve his multi-million pay package.

Shareholders voted 91.5 percent in the "say on pay" vote for JP Morgan's compensation for its executives. They voted 41 percent in favor of an independent chairman, or splitting the role of chairman of the board and chief executive officer, both held by Dimon presently.

The company awarded Dimon, 56, $23 million last year, one of the few CEOs of U.S. banks who did not take a pay cut.

Dimon repeated his comments of contrition, revealing no new details about the massive loss and saying the bank agrees "with the intent of the Volcker Rule," the pending regulation limiting proprietary trading.

"We are not against new regulations," Dimon said.

Dimon said that he has discussed his opinions about financial regulation in previous letters from the chairman. He said the bank has supported 70 to 80 percent of the Dodd-Frank Act and, "I never denied we need good regulation."

"We believe in good, simple and strong regulation," Dimon said in response to one shareholder who asked if the company was resisting new legislation, adding and it is "not a matter of more or less" regulation.

The Wall Street Journal reported Tuesday that the Justice Department has opened an inquiry into the $2 billion trading loss.

One shareholder asked Dimon why the company would not initiate further principal reduction for underwater homeowners if the loss was not significant to the company's bottom line. But officials did not respond.

"You purchased bad loans at a discount...Pass that discount onto clients," she said. "We're talking about real people not just dollar signs and investors - real investors on the streets."

Copyright 2012 ABC News Radio







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