JPMorgan “whale” loss cuts bank trading revenue

NEW YORK, Fri Sep 21, 2012 – JPMorgan Chase & Co.’s multibillion-dollar loss on a bloated derivatives portfolio led the way to a 73 percent decline in U.S. banking industry trading revenue, according to a new government report.

Trading revenue fell to $2 billion in the second quarter from $7.4 billion a year earlier, the Office of the Comptroller of the Currency said on Friday.

“It was clearly the highly publicized losses at JPMorgan Chase that caused the sharp drop in trading revenues,” Martin Pfinsgraff, deputy comptroller for credit and market risk, said in a statement from the OCC. Less demand from clients for trades was also a factor, he said.

Compared with the first quarter, trading revenue fell almost as much, by 69 percent, from $6.4 billion.

So far, JPMorgan has pegged its total loss on the trades at $5.8 billion, using public-company accounting standards and assigning part of the loss to the first quarter.

A London-based trader involved in the trades was known in the credit derivatives market as the “London whale” for the large size of the positions he took.

The OCC’s tally of industry results put JPMorgan’s second-quarter loss on the trades at $3.7 billion, which the regulator said had caused the bank to report an aggregate $420 million trading loss for the quarter. Accounting for bank regulations is different in some ways from that used in companies’ reports to shareholders.

The OCC report echoes similar data reported on Aug. 28 by the Federal Deposit Insurance Corp.