JPM Crashing After It Convenes Emergency Call To Advise Of "Significant Mark-To-Market" Losses In Bruno Iksil/CIO Group

Tyler Durden's picture


Out of nowehere, JPM announced 40 minutes ago that it would hold an unscheduled 5pm call to coincide with the release of its 10-Q. Rumors were swirling as to why. The reason is as follows:

  • JPMORGAN SAYS CIO UNIT HAS SIGNIFICANT MARK-TO-MARKET LOSSES - "Fortress balance sheet" at least until Bruno Iskil gets done with it.
  • "As of March 31, 2012, the value of CIO's total AFS securities portfolio exceeded its cost by approximately $8 billion"

As a reminder, the CIO unit is where Bruno Iksil was making $200 billion-sized bets. Basically JPM has suffered massive losses at its CIO group most likely due to its IG/HY positions held by Iksil.

In Corporate, within the Corporate/Private Equity segment, net income (excluding Private Equity results and litigation expense) for the second quarter is currently estimated to be a loss of approximately $800 million. (Prior guidance for Corporate quarterly net income (excluding Private Equity results, litigation expense and nonrecurring significant items) was approximately $200 million.) Actual second quarter results could be substantially different from the current estimate and will depend on market levels and portfolio actions related to investments held by the Chief Investment Office (CIO), as well as other activities in Corporate during the remainder of the quarter.


Since March 31, 2012, CIO has had significant mark-to-market losses in its synthetic credit portfolio, and this portfolio has proven to be riskier, more volatile and less effective as an economic hedge than the Firm previously believed. The losses in CIO's synthetic credit portfolio have been partially offset by realized gains from sales, predominantly of credit-related positions, in CIO's AFS securities portfolio. As of March 31, 2012, the value of CIO's total AFS securities portfolio exceeded its cost by approximately $8 billion. Since then, this portfolio (inclusive of the realized gains in the second quarter to date) has appreciated in value.


The Firm is currently repositioning CIO's synthetic credit portfolio, which it is doing in conjunction with its assessment of the Firm's overall credit exposure. As this repositioning is being effected in a manner designed to maximize economic value, CIO may hold certain of its current synthetic credit positions for the longer term.


Accordingly, net income in Corporate likely will be more volatile in future periods than it has been in the past.


The Firm faces a variety of exposures resulting from repurchase demands and litigation arising out of its various roles as issuer and/or underwriter of mortgage-backed securities (“MBS”) offerings in private-label securitizations. It is possible that these matters will take a number of years to resolve and their ultimate resolution is currently uncertain. Reserves for such matters may need to be increased in the future; however, with the additional litigation reserves taken in the first quarter of 2012, absent any materially adverse developments that could change management’s current views, JPMorgan Chase does not currently anticipate further material additions to its litigation reserves for mortgage-backed securities-related matters over the remainder of the year.

All of this is coming form the just filed 10-Q. The full link is here. 

Call dial in: (866) 541-2724 in the U.S. and Canada; (706) 634-7246 for international.

Stock now down 5% after hours dragging down ES 7 points with it.

Some segments from the 10-Q as we peruse it:

  • A one-notch downgrade in the Firm’s internal risk ratings for its entire wholesale loan portfolio could imply an increase in the Firm’s modeled loss estimates of approximately $2.0 billion.


and just for some clarity on how this occurred. We know the poisitions that Iksil held were in IG9 (more likely to be tranches) but this $2bn loss comes from a tiny 12bps decompression in the index - which means the DV01 must be huge...(as we already knew given the massive rise in net notional that we warned about)...


This is the Investment Grade credit index series 9 - which is the most active tranche-related index and was the index that Iksil had driven massively rich to its fair-value...

Chart: Bloomberg

Your rating: None

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Thu, 05/10/2012 - 16:52 | 2414599 doomandbloom
doomandbloom's picture

its a buy....


they are getting rid of their losses...who really marks to market anyways?

Thu, 05/10/2012 - 16:54 | 2414624 ihedgemyhedges
ihedgemyhedges's picture

Maybe they should hire Goldman Sachs to run their chief investment office............................then they too can be a muppet.................

Thu, 05/10/2012 - 16:55 | 2414631 Rahm
Rahm's picture

I just had an orgasm.

Thu, 05/10/2012 - 16:58 | 2414640 SilverIsKing
SilverIsKing's picture

Stress test bitchez!

Thu, 05/10/2012 - 17:01 | 2414655 slewie-the-pi-rat
slewie-the-pi-rat's picture

link to the conference call


registration required

Thu, 05/10/2012 - 17:06 | 2414676 Aziz
Aziz's picture

I'm surprised nobody has posted a video of Nelson Muntz yet...

Thu, 05/10/2012 - 17:08 | 2414682 slewie-the-pi-rat
slewie-the-pi-rat's picture

this link should work for direct access to the conference (windows media player)

Thu, 05/10/2012 - 17:09 | 2414692 The Big Ching-aso
The Big Ching-aso's picture



This will trigger a bunch of well-deserved bonuses.

Thu, 05/10/2012 - 17:12 | 2414714 Pladizow
Pladizow's picture

Could'nt have happened to a nicer company!

Thu, 05/10/2012 - 17:17 | 2414740 tocointhephrase
tocointhephrase's picture

Do beef & onion crisps compensate for popcorn?

Thu, 05/10/2012 - 17:18 | 2414747 Dr Benway
Dr Benway's picture

Wow this is spooky... ZH called this one too well, lol!

Thu, 05/10/2012 - 17:20 | 2414748 connel20
connel20's picture

Get your popcorn ready....this party is just getting started!!!!!

Thu, 05/10/2012 - 17:28 | 2414792 CClarity
CClarity's picture

As JPM and the other US TBTFs get smacked, who/what will "save" the European banks tomorrow morning.  Smack down gonna be UGLY.

Thu, 05/10/2012 - 17:38 | 2414839 Rahm
Rahm's picture

JPM has repeatedly stole money from other companies (too numerous to list), me thinks they have a recurring liquidy problem.  Sure smells that way.  Who will get corzined next?

Thu, 05/10/2012 - 17:49 | 2414906 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

The morgue may just be heading to exactly that place!

Thu, 05/10/2012 - 18:11 | 2415030 FlyoverCountryS...
FlyoverCountrySchmuck's picture

What are ya'll sweatin' about?

Dimon is a buddy of OBAMA. So was Corzine. The printing presses will just fire up again, and U.S. Media won't DARE to call it QE3, if they even report it, at all.

We can't endanger the Messiah's reelection in ANY way, doncha know.

Thu, 05/10/2012 - 19:17 | 2415354 jerry_theking_lawler
jerry_theking_lawler's picture

MF Global went under....

Thu, 05/10/2012 - 20:41 | 2415668 Tijuana Donkey Show
Tijuana Donkey Show's picture

To save Morgan. The 'Zini was brought in for the hit. 

Thu, 05/10/2012 - 17:30 | 2414795 lemonobrien
lemonobrien's picture

maybe this is why they hits golds and silvers.

Thu, 05/10/2012 - 17:41 | 2414856 AL_SWEARENGEN

Ha! You think these cocksuckers need a reason??

Thu, 05/10/2012 - 18:13 | 2415045 Comay Mierda
Comay Mierda's picture

should have seen the weekly JPM put volume going into close, prob Dimon buying, he just got his bonus.  those puts prob be up 500%+ tomorrow. he's laughing all the way to the bank.

Thu, 05/10/2012 - 17:39 | 2414850 XitSam
XitSam's picture

Dimon in Congressional testimony a month from now: "I don't have access to the records since I haven't been in the office. I was too busy arranging a sale of company assets to track small transactions of $100 or 200 billion. I did not think or intend that my instructions to transfer any customer money would be taken literally. The customer accounts vaporized. Don't hate me because I'm rich." 


Fri, 05/11/2012 - 19:41 | 2418994 Rahm
Rahm's picture

Dimon in Congressional testimony a month from now: "I plead da fif."

Fixed it for you.

Thu, 05/10/2012 - 18:01 | 2414742 fuu
fuu's picture

Even if you are the wrong ass slewie, good link.


"we are not going to call another call every time the number moves half a billion dollars."

Thu, 05/10/2012 - 23:36 | 2416169 slewie the pi-rat
slewie the pi-rat's picture

no clonie baloney?

Thu, 05/10/2012 - 17:05 | 2414679 Manthong
Manthong's picture

Pretty long red candles on the spx.

Is this a formal event? 

Thu, 05/10/2012 - 17:25 | 2414773 economessed
economessed's picture

Long, red melty candles?  Were you looking for me? 

Thu, 05/10/2012 - 16:59 | 2414641 bdc63
bdc63's picture

I feel like I just won the lottery ...

Thu, 05/10/2012 - 17:16 | 2414730 The Big Ching-aso
The Big Ching-aso's picture



Doing God's Work sometimes comes out underpar for the coarse.

Fri, 05/11/2012 - 00:35 | 2416251 mt paul
mt paul's picture


is unemployed ....

Thu, 05/10/2012 - 17:14 | 2414723 IMA5U
IMA5U's picture


Thu, 05/10/2012 - 18:39 | 2415164 azzhatter
azzhatter's picture

did you hit jamie in the face with the spooie?

Thu, 05/10/2012 - 19:14 | 2415338 sunaJ
sunaJ's picture

Of course, we know this is indeed not an "emergency" meeting.  Emergency meetings would have been years ago.  This call is Damage Control, right up to the 5pm timing.  JPMorgan is going Print or BUST!

Thu, 05/10/2012 - 17:13 | 2414719 johngaltfla
johngaltfla's picture

Hey look everyone:

FAZ is fun again!


Thu, 05/10/2012 - 17:16 | 2414734 The Big Ching-aso
The Big Ching-aso's picture



WTF?   Mark-To-Market still exists?   WTF.

Thu, 05/10/2012 - 17:27 | 2414783 CrashisOptimistic
CrashisOptimistic's picture

Yes, it does.  And worse:

"Basically JPM has suffered massive losses at its CIO group most likely due to its IG/HY positions held by Iksil."

Or perhaps Greek sovereign swaps?

Thu, 05/10/2012 - 17:38 | 2414830 johngaltfla
johngaltfla's picture

Dear Santa Bernank,

All I want is a FAZ and DZZ double for Christmas.

Preferably by August so I can commit to a long vacation in the islands.

Thank you,


Thu, 05/10/2012 - 17:45 | 2414881 ouchtouch
ouchtouch's picture

I had to go into my account to check how much FAZ I bought last month -- LOTS!!!  WEEEE!

Thu, 05/10/2012 - 18:14 | 2415043 johngaltfla
johngaltfla's picture

It's been the best. Got out again at 51, got in at 21.17.  Wheeeeeeeeeeeeee!!!!




Thu, 05/10/2012 - 17:50 | 2414903 NumberNone
NumberNone's picture

Mark-to-Market on synthetic credit portfolio nonetheless.  Synthetic being no actual assets being held.  Someone really fucked up a bet.  There is more to this story.

Thu, 05/10/2012 - 17:19 | 2414750 HedgeAccordingly
HedgeAccordingly's picture


Thu, 05/10/2012 - 20:13 | 2415540 Buck Johnson
Buck Johnson's picture

From that chart, it must be much much more than 2 billion dollars in loses.  I would say it could be 80 billion if not more.

Thu, 05/10/2012 - 16:54 | 2414604 Boilermaker
Boilermaker's picture

Looks like I picked the wrong day to stop sniffing glue!

I only know one thing at this point.  REIT equity is the only financial instrument to never ever EVER go down.  Somehow this is bullish.

Thu, 05/10/2012 - 16:58 | 2414639 Cdad
Cdad's picture

Brother Boiler,

Ummmm.....its the banks that hold all that REIT equity.  I think you just got your catalyst to sell all of those over-priced animals.

Thu, 05/10/2012 - 17:27 | 2414657 Boilermaker
Boilermaker's picture

IYR barely budging AH.

JPM - 5% , IYR -0.6%

I don't get it anymore.

UPDATE:  IYR improving and about to post AH gains. Just to make it completely retarded.

Thu, 05/10/2012 - 17:05 | 2414680 SheepDog-One
SheepDog-One's picture

Yep Cdad, this is another 'signal' they put out to tell those in the know to GTFO.

Thu, 05/10/2012 - 17:44 | 2414752 The Big Ching-aso
The Big Ching-aso's picture



JP Morgan himself must be rolling over in this grave loss.

Thu, 05/10/2012 - 17:07 | 2414681 johngaltfla
johngaltfla's picture

Everything is bullish until it isn't. At some point the Fed loses unless they double down. So far, the Fed hasn't decided who they want to be POTUS.

Thu, 05/10/2012 - 17:12 | 2414706 WonderDawg
WonderDawg's picture

Does it matter? POTUS jus be takin' orders, he don't be makin' 'potant decisions.

Thu, 05/10/2012 - 17:16 | 2414736 johngaltfla
johngaltfla's picture

OH YES it matters...because they want someone in charge that won't prosecute.

Nevermind, neither clown will, back to the coin flip.

And FAZ was a STEAL at $21....I'm just sayin'....

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