Thursday 21 June 2018

S&P revises JPMorgan outlook to negative

New York, May 12, 2012

Standard & Poor's Ratings Services has revised its outlook on JPMorgan Chase & Co to negative from stable, the latest blow to the bank after it revealed a shocking $2 billion trading loss from a failed hedging strategy.

Standard & Poor's also affirmed its A/A-1 issuer credit ratings on JPMorgan.

"We believe the possibility of broader problems with JPM's hedging strategies is not consistent with what we have viewed as the company's sound risk management practices," Standard & Poor's said in a statement.

The S&P outlook revision came on the heels of a one-notch cut by Fitch Ratings to JPMorgan's credit rating to A-plus from AA-minus - still well within investment grade territory.   

"Management's admission that the hedging strategy was 'flawed, complex, poorly reviewed, poorly executed, and poorly monitored' contributes to our negative outlook," S&P added.

JPMorgan is a global financial services company with $2.2 trillion in assets. Its disclosure of the trading loss was a shock, given the long-held view that it was a strong risk manager that went through the financial crisis without reporting a loss.

It is an embarrassing admission, especially since chief executive Jamie Dimon has been an outspoken critic of the so-called Volcker rule to ban proprietary trading by big banks.

JPMorgan Chase & Co lost $15 billion in market value on Friday, with the fallout extending across much of the banking sector.     

"We continue to view JPM's broad lines of businesses and its geographic diversification as positive factors," Standard & Poor's added. "And we note that losses from the hedging strategy are unlikely to weaken the company's customer relationships or its core banking businesses." - Reuters

Tags: S&P | JP Morgan | derivatives | hedging |


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