JPMorgan Chase has sold off most of the losing corporate-credit position put on by a trader nicknamed the London Whale, say people familiar with the matter, marking a significant step toward putting an embarrassing chapter behind it.
In recent weeks, the bank has divested itself of 65 to 70 percent of its holdings in a credit, or bond, derivative index known as the CDX IG 9, which tracks a certain cross-section of corporate debt instruments. The position played a major role in what JPMorgan has estimated to be at least $2 billion in losses, a figure bank chief Jamie Dimon first acknowledged publicly on May 10.
Dimon has taken pains to conceal the details of the trade in hopes of making JPMorgan’s exit from the positions smoother. Still, some of the Whale’s positions have been widely reported, and as a result, say credit traders, inhospitable market conditions may have ballooned the bank’s eventual losses to as great as $5 billion.
JPMorgan has refused to speculate on what the final number might be, but Dimon has said the bank would hold on to its London Whale positions as necessary in order to minimize the additional losses.
Since disclosing that trade, which Dimon said in May had been “poorly executed and poorly monitored,” JPMorgan shares have fallen more than 11 percent. Wednesday morning, however, after CNBC reported that the bank had successfully sold off roughly two-thirds of the trade, shares were up about 2 percent.
But it remains a sensitive time for the once-untouchable Dimon and his firm. Shortly after acknowledging the London Whale debacle, Dimon replaced Ina Drew, who presided over the CIO when the losing trades were put on, with former co-head of fixed income Matt Zames; other traders have also parted ways with the bank. Meanwhile, on Capitol Hill, Dimon has been forced to testify about the Whale losses twice in the past ten days alone.