JPMorgan’s magical numbers

JPMorgan has just announced that its hedging losses that CEO Jamie Dimon had previously said were a “tempest in a teapot” are now $5.8 billion, up $3.8 billion from the previous announcement. “At most” he says, “any additional losses will be limited to another $1,7 billion from the bad credit trades.”

Happily, all this bad news coincides with what would have been the bank’s best quarter ever. The announced earnings per share (EPS) of $1.21 compares well with the previous record of $1.34 earned in Q1/2007. The effect of the hedging losses taken in the second quarter are $0.69. So without that extraordinary trading loss, the EPS would have been a record $1.90. Now that’s a happy coincidence.

After making the announcement of the increased loss and the quarterly profit JPMorgan’s shares rose by almost 6%.

Now we do know that in the next quarter there’s going to be another charge of up to $1.7 billion. But, if these numbers are real, then in the quarter after that, the business is going to be very profitable.

So the share price should have jumped a lot more.

Perhaps there are other people who are a little skeptical about the numbers.

More at:
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