JPMorgan loses $1.5 billion so far in third quarter

August 12, 2008 by · Leave a Comment
Filed under: Industry News 

The losses keep rolling in.  I expect to continue to see more write-downs and losses into 2009.  Risk spreads are still quite wide and that tells us the market still thinks there are more hidden grenades on balance sheets waiting to explode on unsuspecting investors.  Here is the release.

Release:

Investment bank JPMorgan Chase & Co has incurred losses of about $1.5 billion since the start of July, hurt by turmoil in the credit and mortgage markets and by wider credit spreads and lower levels of liquidity, the company said in a regulatory filing late Monday.

JPMorgan said trading conditions have “substantially deteriorated” in the third quarter compared with that of the second, and spreads on mortgage-backed securities and loans have “sharply widened”. The estimated losses exclude hedging, the firm said.

In addition, if the bank’s own credit spreads tighten, the change in the fair value of certain trading liabilities would also hurt trading results, JPMorgan said.

The third-largest U.S. bank was forced to write down the value of its $33 billion in mortgage-backed securities as prices continued to drop in July, the Financial Times said Tuesday, citing people close to the company.

The writedowns were partly driven by Merrill Lynch & Co Inc’s recent decision to sell $30.6 billion in risky debt to U.S. private equity firm Lone Star Funds for just $6.7 billion, or about 22 cents on the dollar, the FT said.

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