JP Morgan announces losses of $5.8bn

For a bank that aims to be “the world’s most trusted and respected financial services institution”, its latest quarterly results have been something of an embarrassment, coming as it does with a promise to restate its Q1 results as well.

Second quarter earnings fell 8.7% on last year, on a 17% decline in revenue and losses of $4.4bn resulting from its soured Chief Investment Office trades. The bank indicated it might also post losses from first quarter credit derivative trades, of between $700m to $1.7bn.

JP Morgan said its overall losses on Chief Investment Office trading for the first half of 2012 stood at $5.1bn. Despite these losses, second quarter profits were $4.96bn, down from $5.43bn last year.

Its investment banking division posted profits of $1.91bn, down 7% from last year. Its retail services division reported profits of $2.27bn, a huge increase on last year’s $383m.

The announced losses tarnish the reputation of JP Morgan, which had prided itself on coming through the global financial crisis unscathed and profitable. However, for Warren Buffett, who has a personal stake in JP Morgan of about $1m, the bank’s reputation remains intact.

Since announcing trading losses in May, shares in the bank had lost $25bn in market value, but shares jumped in New York trading on announcement of the results.

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