Analyst View: JPMorgan loses $4.4 billion on trades, but earns profit still

(Reuters) - JPMorgan Chase & Co reported $4.4 billion of trading losses in the second quarter on Friday, but still earned an overall profit of $4.96 billion.

Following are quotes from analysts and other experts on the bank’s results and its explanation of how the bank lost about $6 billion in its Chief Investment Office this year:

CHARLES BIDERMAN, FOUNDER AND CHIEF EXECUTIVE, TRIMTABS INVESTMENT RESEARCH:

“To quote Jim Bianco (founder of Bianco Research LLC), so Barclays admits its traders made up LIBOR prices 5 years ago, but they do not have to restate any prior earnings results. (CEO) Bob Diamond has to resign. JP Morgan admits their traders made up CDS prices to the point that they have to restate Q1 results. (CEO) Jamie Dimon does not have to resign. Please explain.”

BONNIE BAHA, PORTFOLIO MANAGER AT DOUBLELINE CAPITAL LP:

“I think JP Morgan’s business model, as opposed to Jamie Dimon, is on the line. In the nearly four years since the global financial crisis, our banking system has further consolidated and become more concentrated to the point where the systemic risk is far less diversified. You almost have to ask if we learned anything at all after 2008.”

ANTON SCHUTZ, PRESIDENT, MENDON CAPITAL ADVISORS, ROCHESTER, NEW YORK (manages $140 million of financial stocks, including JPMorgan)

“They had a unit that wasn’t marching in line with policy, they needed to strengthen their procedures, and I think they have. They’ve obviously shut down the CIO, but they didn’t talk about what that means for future earnings power. This unit contributed in the past. A few cents a share is a few cents a share. (The CIO produced about $2 billion of gains between 2007 and 2011.)

“I’m not buying here. They’ve got to put up a whole lot of clean quarters to regain the status they had, to show they really deserve to trade higher than everyone else. Every shareholder was disappointed with them. The bloom may not be off the rose, but a couple of petals have fallen off.”

WARREN BUFFETT, CEO, BERKSHIRE HATHAWAY (Has said he owns J.P. Morgan shares in his personal accounts):

“In terms of the loss from a transaction of that size, my guess is they pretty well worked out of it by now,” Buffett said in a TV interview. “It is a whole lot of money but it’s not that significant, relative to J.P. Morgan.”

JANET TAVAKOLI, PRESIDENT, TAVAKOLI STRUCTURED FINANCE INC:

“I am making an enemy here when I say something like this, but the Fed should replace Jaime Dimon. They should replace him for utter failure of corporate governance and telling the truth too slowly.”

KIM FORREST, SENIOR EQUITY RESEARCH ANALYST, FORT PITT CAPITAL GROUP IN PITTSBURGH:

“When I heard there was going to be a two-hour conference call, you wonder why - and now you know. (Dimon) has a lot of explaining to do about how this could happen. Banks, the only thing they really have is their perception of solidity. What they are doing is taking your money and lending it out almost immediately and then saying you can get it any time you want - so it’s not really there. They have to build this image of solidness, and the London Whale thing and now this is really chipping away at the foundation of the banks and it’s going to bleed into other banks as well.

“We have a two-hour conference call coming up and anything can be said. The analogy that I was taught when I got in this business was you see one cockroach, you are a fool not to expect others - this is the big old cockroach. Banking is the keystone of the economy, and it is a good glimpse into how money is flowing. What I saw good out of this is JPM saw higher revenues. I’d like to look into the details, but hopefully some of the revenue came from commercial lending, which is something we’ve been looking for awhile - for any bank - as being the sort of light at the end of the tunnel.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, ROCKWELL GLOBAL CAPITAL, NEW YORK:

“JPMorgan numbers came in not that ugly, considering what took place. That will be a relief to the market. Regardless, the market is going to be more focused on the good news today, like the GDP out of China, which looks like it is in line with expectations, and also Italian and Spanish bond auction news. Those will outweigh JPMorgan news.”