JPMorgan Q2 'to be solidly profitable'

JPMorgan Chase chief executive Jamie Dimon said Tuesday that the giant bank should report strong earnings in the second quarter despite $2 billion or more in shock losses on derivatives trading. "All of our lines of business remain profitable and continue to serve consumers and businesses," Dimon said in prepared testimony for a Senate committee hearing Wednesday, released early by the bank. "While there are still two weeks left in our second quarter, we expect our quarter to be solidly profitable." Dimon, who is due to appear in front of the US Senate Committee on Banking to explain the derivatives debacle, admitted the trading strategy that led to the huge loss was "poorly conceived and vetted." Moreover, he added, traders in the bank's Chief Investment Office responsible for the losses "did not have the requisite understanding of the risks they took." But he insisted the bank's "fortress" balance sheet "remains intact" despite the losses. "We will not make light of these losses, but they should be put into perspective," he said. "Our strong capital position and diversified business model did what they were supposed to do: cushion us against an unexpected loss in one area of our business." On May 10, the prestigious Wall Street bank shocked investors in revealing a $2 billion loss in derivatives trading over just six weeks and said an additional $1 billion loss was possible by the end of June. The massive losses have raised questions about the largest US bank's internal controls and regulation in the financial system that was at the center of the deep 2008-2009 recession. The losses also tarnished Dimon's reputation as Wall Street's "Golden Boy" and raised doubts about his aggressive campaign to roll back tougher regulation of banks, including a tight clampdown on how they trade their own assets for profits. In his testimony Dimon described a trading strategy in the CIO's London operation that originally aimed at adjusting the bank's capital position to meet new Basel standards for major banks around the world. But rather than simply reducing its positions, the CIO "embarked on a complex strategy that entailed adding positions that it believed would offset the existing ones." "This strategy, however, ended up creating a portfolio that was larger and ultimately resulted in even more complex and hard-to-manage risks," turning into something "that, rather than protect the Firm, created new and potentially larger risks."