JPMorgan revises profit down amid trading probe
Timothy A. Clary/AFP/Getty Images
(AP) NEW YORK - JPMorgan Chase (JPM) on Thursday formally revised its first-quarter financial results to show a lower profit, after deciding that traders at its main investment arm had overstated the value of certain derivatives.
The reduction followed the bank's internal investigation into the nearly $6 billion in trading losses revealed in recent months.
JPMorgan reiterated that it had discovered that some traders may have tried to conceal the size of losses from a soured bet. The so-called "London Whale" trades involved complicated hedging strategies intended to reduce the bank's risk, but actually increased it when they backfired.
In a regulatory filing, the New York bank said the probe found information that "suggested that certain individuals may have been seeking to avoid showing the full amount of the losses being incurred."
As it revealed last month, the bank now says that it earned $4.92 billion for the quarter ended March 31. That's $459 million less than the $5.38 billion originally reported.
On a per share basis, the results came to $1.19, versus the $1.31 originally reported.
The bank also admitted to a "material weakness" in its internal controls. It said steps have been taken to address the problems, but noted that management is continuing an internal review of the matter.
The huge loss has embarrassed JPMorgan, which made it through the financial crisis with a reputation for taking less risk with its customers' money than other major banks. CEO Jamie Dimon has been called before Congress to explain the debacle, and the Justice Department, the Securities and Exchange Commission and other regulators, including one in Britain, are looking into the loss.
The bank may still face civil fraud charges stemming from filing its original financial statements. If regulators decide that employee deceptions caused JPMorgan to report inaccurate financial details, they could pursue charges against the employees, the bank or both.
The bank could not necessarily hide behind the actions of its employees. Regulators could decide that its oversight or risk management contributed to the problematic statements.
In premarket trading, JPMorgan Chase & Co. shares slipped 31 cents to $36.85. The stock traded as high as $46.89 in March before the big loss came to light, but is still up nearly 12 percent for the year.
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