JPMorgan's 'London Whale' losses hit $5.8 bn

JPMorgan Chase on Friday admitted that losses from botched derivatives trades had soared to $5.8 billion, nearly triple the cost originally predicted, while the bank warned of more red ink to come.

The losses -- which were linked to a British unit that included a trader dubbed "the London Whale" -- have cost $5.8 billion since the beginning of the year, according to chief financial officer Doug Braunstein.

The soured bets were originally forecast to set the firm back at least $2 billion.

The new figures were revealed as the bank reported profits for the second quarter that slid to $5 billion, a drop of nine percent compared with the same period a year earlier.

The bank also revised down first-quarter earnings by $459 million.

Chief executive Jamie Dimon said JPMorgan had "significantly reduced" the risk from the mismanaged derivatives hedging scheme, even as it sought to quickly unwind the positions.

But he admitted the bank could face further losses of between $800 million and $1.7 billion.

The initial acknowledgment of the problem came in May amid scrutiny of the actions of one trader, Bruno Michel Iksil -- nicknamed "the London Whale" because of the splash made by his cetacean-sized bets.

He has now been fired, along with others held responsible, and faces efforts by the firm to claw back pay, bonuses and other cash.

But this is likely not the end of the saga for the storied bank, which in May revealed that a scheme at the company's Chief Investment Office (CIO) designed to mitigate risk had spectacularly backfired.

As well as the substantial losses, the 141-year-old firm still faces massive reputation damage and a string of legal and political woes.

Dimon announced Friday that what remains of the dodgy portfolio had been transferred to the company's investment bank and that the CIO unit would, in future, stick to less risky trades.

"We have already completely overhauled CIO management and enhanced the governance standards within CIO," he said in a statement.

The scandal was a humiliation for Dimon -- one of Wall Street's best-known titans -- and for the bank, after it proudly came through the 2008 financial crisis in far better shape than its rivals.

Stock markets appeared to take solace from the earnings report, with JPMorgan shares up 5.9 percent in the closing minutes of New York trade.

"The worst appears to be behind the bank as far as this multi-billion trading loss is concerned," said Jon Ogg at 24/7WallSt.com.

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