Shares in the Wall Street-headquartered banking giant had fallen around 7 per cent late yesterday. The bank is due to hold a conference call today 5:00 pm ((Eastern). The bank’s website contained few other details on the matter and press spokespersons declined to give further details when contacted. 

"This puts egg on our face," JP Morgan chief executive Jamie Dimon was quoted by reports as saying in a conference call with analysts. He said the losses were linked to a Wall Street Journal report last month about a trader, dubbed the 'London Whale', who, reports said, amassed an outsized position which hedge funds bet against.

US public services union, AFSCME, renewed its call on JP Morgan shareholders to end Dimon’s tenure as chairman and CEO and to adopt an independent board chair.  “Wall Street greed and conflicts of interest drove our economy into a ditch. JP Morgan Chase shareholders need to act together and tell the board that we want meaningful controls over risk and real oversight of management.  We need an independent chairman of the board.  The stakes are too high to leave Jamie Dimon unsupervised.  Dimon denied that the ‘London Whale’ was making risky bets, and now that this has turned out to be a fish story, shareholders need to step in,” AFSCME plan trustee Gerald McEntee said in a statement.

Shareholders are due to vote May 15 at the company’s annual meeting on a shareholder proposal submitted by the AFSCME Employees Pension Plan calling on JPM to adopt an independent board chair who will provide improved oversight and risk management.

Implications

The loss will put fresh focus on whether a problem at an investment banking side of an integrated firm could hit clients of other business divisions, such as a private bank. Last year, when Switzerland’s UBS disclosed a $2.3 billion loss caused by unauthorised trading in London, it prompted further concerns about whether trading activity can cause wider damage to a banking group.

JP Morgan said in a filing with the Securities and Exchange Commission that since end-March, its Chief Investment Office has had significant mark-to-market losses in its synthetic credit portfolio. Such portfolios use derivatives to replicate the performance of physical securities.

According to Reuters, the bank estimates the business unit with the portfolio will post a loss of $800 million in the current quarter, excluding private equity results and litigation expenses. The bank previously forecast the unit would make a profit of about $200 million.

"It could cost us as much as $1 billion or more," in addition to the loss estimated so far, Dimon is quoted as having said. "It is risky and it will be for a couple quarters."