For Immediate Release
Chicago, IL - May 14, 2012 - Zacks.com announces the list of
stocks featured in the Analyst Blog. Every day the Zacks Equity
Research analysts discuss the latest news and events impacting
stocks and the financial markets. Stocks recently featured in the
Bank of America
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Here are highlights from Friday's Analyst Blog:
JPM Trading Loss Hits Bank Stocks
Following the announcement of a huge trading loss at
JPMorgan Chase & Co.
), the banking sector stocks fell in the after-market trading on
Thursday. In its quarterly regulatory filing, JPMorgan stated that
its chief investment office (CIO) has incurred substantial
mark-to-market losses during the first six weeks of the current
CIO is a unit of JPMorgan, which it uses to make broad-based
bets in order to hedge its loan portfolio.
JPMorgan incurred a huge loss of nearly $2 billion in its
synthetic credit portfolio, which was partially mitigated by
securities gain of $1 billion. This portfolio is under Corporate
division, within the Corporate/Private Equity segment. The company
stated that Corporate is now expected to report a net loss of about
$800 million for the second quarter, which was previously estimated
to be a profit of $200 million.
This shocking revelation shattered the confidence level of the
investors and JPMorgan's shares plunged nearly 7% in the
after-market trading. This also dragged down the stock prices of
the entire banking sector. Likewise, the shares of banking giants,
Bank of America Corporation
Wells Fargo & Company
The Goldman Sachs Group Inc.
), etc. were down more than 2% in after-hours trading.
Wall Street Journal
reported that JPMorgan had been heavily investing in an index of
credit default swap (a type of derivative), which was to protect
the company against the potential losses on its large holdings of
loans and bonds. However, JPMorgan's strategy backfired as the
repositioning of the credit portfolio was poorly monitored and
executed, leading the recent huge losses.
Further, JPMorgan incurred losses at a time when regulators had
already set the date for the implementation of Volcker rule.
Moreover, JPMorgan runs the risk of further hedge-related losses
over the quarter. These losses are expected to significantly dampen
the company's overall financial results in the second quarter.
Currently, JPMorgan retains a Zacks #3 Rank, which translates
into a short-term Hold rating. Considering the fundamentals, we
also maintain a long-term Neutral rating on the stock.
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