JP Morgan’s $4.4 million CIO loss drives profit down 9%

JPMorgan Chase & Co., the largest U.S. bank, reported a $4.4 billion trading loss in its chief investment office, bigger than analysts estimated, that helped drive second-quarter profit down 9 percent.

Net income fell to $4.96 billion, or $1.21 a share, from $5.43 billion, or $1.27, in the same period a year earlier, the New York-based company said today in a statement. Six analysts surveyed by Bloomberg estimated the CIO trading loss at $4 billion. The company also restated first-quarter earnings, reducing net income by $459 million, and used securities gains and an $800 million accounting benefit to help boost profit.

The trading loss may complicate efforts by Chief Executive Officer Jamie Dimon, 56, to restore investor confidence after losing $39.7 billion in market value since April 5, when Bloomberg News first reported that the company had amassed an illiquid book of credit derivatives at the London unit. The firm also is being probed over the possible gaming of U.S. energy markets and was subpoenaed in global investigations of interest- rate fixing in London.

“The restatement is not good, and at first glance, the numbers are so-so,” said Paul Miller, a former examiner for the Philadelphia Federal Reserve Bank and analyst at FBR Capital Markets Corp. in Arlington, Virginia.

JPMorgan rose to $34.79 in New York trading at 7:36 a.m. from $34.04 yesterday. The shares were down 2.4 percent this year through yesterday.

Analysts’ Estimates

Second-quarter net income excluding the effect of accounting adjustments known as DVA was $1.09 a share. Excluding DVA, loan-loss reserve reductions and a Bear Stearns-related recovery, profit was 67 cents. Analysts surveyed by Bloomberg had estimated adjusted earnings per share of 76 cents.

In a departure from his customary earnings-day conference call, Dimon is meeting analysts in person for two hours starting at 7:30 a.m. today at the bank’s New York headquarters to field questions about the loss and what he’s doing to contain the damage.

Dimon dismissed reports about the London operation as a “tempest in a teapot” when the bank reported first-quarter earnings on April 13. He reversed course less than four weeks later, disclosing a $2 billion loss that he said could grow to $3 billion or more during the quarter.

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