Botched trades by a unit of JPMorgan Chase & Co. that Jamie Dimon had pushed to boost profit were masked by weak internal controls and may ultimately saddle the bank with a $7.5 billion loss.
JPMorgan’s chief investment office has lost $5.8 billion on the trades so far, and that figure may grow by $1.7 billion in a worst-case scenario, Dimon, the bank’s chairman and chief executive officer, said today. Net income fell 9 percent to $4.96 billion in the second quarter, the bank said. It restated first-quarter results to reduce profit by $459 million after a review of the unit found employees may have hid souring bets.
JPMorgan accepted an offer by Ina Drew, the former head of the CIO, to return as much as two years of her compensation, according to Joseph Evangelisti, a spokesman for the bank.
JPMorgan said May 10 that it had taken $1 billion in profits from securities sales in the CIO to mitigate the trading loss and planned more asset sales if needed to offset the damage, which was caused by a wrong-way bet on credit derivatives by Iksil. Dimon hired Macris in 2006 with a mandate to generate profits. Macris and Iksil eventually built up a position in credit derivatives that was so large it couldn’t be unwound without roiling markets.