A few hours after a Fitch downgrade, S&P said its outlook for JP Morgan (NYSE: JPM) has gone from “Stable” to “Negative” in the wake of a $2 billion loss on a series of trading positions, and fall out which could cause more regulation of big banks. JPM also said the the loss could increase
The agency wrote:
Standard & Poor’s Ratings Services today said it revised its outlook on JPMorgan Chase & Co. (JPM) and its banking subsidiaries to negative from stable. At the same time, we affirmed our ‘A/A-1’ issuer credit ratings on JPM and our ‘A+/A-1’ issuer creditratings on its banking subsidiaries.
“The outlook revision reflects JPM’s recently announced, unexpected pretax loss of $2 billion in its Chief Investment Office portfolio related to the miscalculation of a hedge consisting of synthetic credit exposures,” said Standard & Poor’s credit analyst Stuart Plesser. After reporting a gain of $1 billion from securities sales, the company expects to post an $800 million aftertax loss in this division for the second quarter. Previously, JPM said it expected to report a gain of about $200 million in this division.
The news will add to calls for the government to separate large bank corporate and consumer banks from trading operations.
Douglas A. McIntyre