JPMorgan loses $1.5 billion since July
JPMorgan Chase & Co incurred losses of about $1.5 billion for the quarter to date, as it continued to be hurt by wider credit spreads, lower levels of liquidity, as well as the disruption in the credit and mortgage markets.
In addition, if the firm's own credit spreads tighten, the change in the fair value of certain trading liabilities would also negatively affect trading results, the company said.
JPMorgan held $16.3 billion of legacy leveraged loans and unfunded commitments as of June 30.
“Leveraged loans and unfunded commitments are difficult to hedge effectively, and if market conditions further deteriorate, additional markdowns may be necessary on this asset class,” JPMorgan said.
As of June 30, the company also held an aggregate $19.5 billion of prime and Alt-A mortgage exposure, $1.9 billion of subprime mortgage exposure, and $11.6 billion of commercial mortgage-backed securities (CMBS) exposure, a regulatory filing showed.
“These mortgage exposures could be adversely affected by worsening market conditions, further deterioration in the housing market and market activity reflecting distressed sellers,” the company said.
Last month, JPMorgan Chase posted a smaller-than-expected drop in earnings on resilient stock and bond underwriting revenue, but cautioned that the mortgage market and the economy were getting worse.
In the August 11 filing, the company said it also expects continued deterioration in credit trends for its consumer portfolios, and that this will likely require additions to the consumer loan loss allowance during the rest of 2008.
Quarterly net charge-offs in the home equity portfolio could continue to increase for the rest of 2008, the company said.
Prime and subprime mortgage net charge-offs were likely to continue to rise “significantly” in the second half of 2008, with deterioration expected to continue into 2009, JPMorgan said. Shares of the company closed at $41.89 Monday on the New York Stock Exchange. (Reuters)
SUPPORT THE BUDAPEST BUSINESS JOURNAL
Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.