JPMorgan's US$1.5bn loss

Source: Exec Digital USA

Date :8/12/2008 12:47:40 AM

JPMorgan Chase & Co has incurred losses of about US$1.5 billion for the quarter to date.

The bank continued to be hurt by wider credit spreads and lower levels of liquidity as well as the disruption in the credit and mortgage markets, the US investment bank said in a regulatory filing.

The third-largest US bank said trading conditions have “substantially deteriorated” in the third quarter compared with those of the second.

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 US$16.3 billion of legacy leveraged loans and unfunded commitments as of June 30, the filing showed.

“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 US$19.5 billion of prime and Alt-A mortgage exposure, US$1.9 billion of subprime mortgage exposure, and US$11.6 billion of commercial mortgage-backed securities (CMBS) exposure, the 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.