JPMorgan $2 billion loss hits shares, dents image

Fri May 11, 2012 6:53pm EDT
 
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By David Henry and Douwe Miedema

NEW YORK/LONDON (Reuters) - JPMorgan Chase & Co lost $15 billion in market value and a notch in its credit ratings on Friday while a chorus of regulators and politicians reacted to its surprise $2 billion trading loss by demanding stiffer oversight for the banking industry.

Republican Senator Bob Corker of Tennessee called for a hearing into the losses that the largest U.S. bank disclosed Thursday, while Securities and Exchange Commission Chairman Mary Schapiro told reporters: "It's safe to say that all the regulators are focused on this."

The debacle sparked new fears about big banks and prompted Dallas Federal Reserve Bank President Richard Fisher, who has called for the breakup of the top five U.S. banks, to say he is worried the biggest banks do not have adequate risk management.

The fallout extended across much of the banking sector, with shares of some of Wall Street's top names declining on Friday. Among others, Citigroup dropped 4.2 percent, Goldman Sachs fell 3.9 percent and Bank of America slipped 1.9 percent.

JPMorgan was far away the worst performer, however, falling 9.3 percent on a day when some 212 million of its shares traded, the most volume in its history.

Fitch Ratings downgraded JPMorgan's debt ratings by one notch and put all of the ratings of the bank and its subsidiaries on negative ratings watch.

While Fitch saw the size of the loss as manageable, "the magnitude of the loss and ongoing nature of these positions implies a lack of liquidity," the ratings agency said. "It also raises questions regarding JPM's risk appetite, risk management framework, practices and oversight; all key credit factors."

"Fitch believes the potential reputational risk and risk governance issues raised at JPM are no longer consistent with an 'AA-' rating," it said.   Continued...

 
A man walks into the JP Morgan headquarters at Canary Wharf in London May 11, 2012. REUTERS/Dylan Martinez