This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

JPMorgan Down on '$9 Billion' Loss Estimate (Update 1)

Updated with current market information and reaction from Wells Fargo analyst Matthew Burnell.

NEW YORK (TheStreet) -- Shares of JPMorgan Chase (JPM) were down 5% in afternoon trading on Thursday to $35.10, after the New York Times reported that the company's hedge trading losses could reach as high as $9 billion.

JPMorgan CEO James Dimon announced the company's Chief Investment Office's trading losses after the market close on May 10, estimating "slightly more than $2 billion" for the second quarter. With the company having already "out of more than half the trade," the company has projected losses, "assuming worst case conditions," of between $8 and $9 billion, according to the Times, citing an unnamed source who reviewed an internal company report.

JPMorgan CEO James Dimon

The Times also said that with "much of the most volatile slice of the position sold," regulators are "unsure how deep the reported losses will eventually be, with some expecting ultimate losses of between $6 billion and $7 billion.

Dimon said on May 21, following his announcement that JPMorgan Chase was suspending its share repurchase program, that he expected the company to be "solidly profitable" for the second quarter.

JPMorgan Chase's shares closed at $36.78 Wednesday, returning 12% year-to-date, following a 20% decline in 2011. The shares were down 10% since closing at $40.74 on May 10, before Dimon disclosed the trading losses, recovering from a closing low of $31.00 on June 4.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

Based on a 30-cent quarterly payout, the shares have a dividend yield of 3.26%.

At Wednesday's close, the shares traded just above their reported March 31 tangible book value of $34.91, and for less than seven times the consensus 2013 earnings estimate of $5.32 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $4.34.

Stifel Nicolaus analyst Christopher Mutascio has a "Hold" rating on JPMorgan Chase, and said on Thursday morning that he has "no idea if the $9 billion figure reported in the article is accurate," but if that loss figure "is spread out over a few quarters, then the company could still remain profitable on a quarterly basis," since the firm has "posted net income ranging from $3.5-$5.0 billion (after preferred dividends)."

The analyst went on to say that "if the company is solidly profitable in 2Q12 and the $9 billion figure is accurate and absorbed in one quarter, then it suggests to us that the company is harvesting a substantial amount of the previously disclosed $8+ billion in unrealized investment securities gains to at least partially offset the losses from the unwind of the hedge."

Mutascio thinks that "the real focal point for 2Q12 earnings should be net interest income," and not the trading losses, since proceeds from a large sale of investment securities to harvest unrealized gains would have to be reinvested at the lower rates prevailing in the market. Therefore, "the bigger long-term risk (more permanent risk) to earnings at JPM is not the losses from the unwind of the hedge - rather, it could be the potential reduction in net interest income levels from de-risking the CIO investments into low yielding securities/assets."

Stock quotes in this article: JPM 

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs