According to a recent Reuters article investigating the lingering effects of JP Morgan's massive losses from the bank's London CIO unit, "Jamie Dimon's whale is turning into an albatross."
As a direct consequence of the .8 million in losses in the first and second quarter, the bank has been forced to suspend its stock buyback program and recalculate capital ratios to better reflect its risk metrics. JPMorgan also revamped the VaR calculation that it relied on just as the Whale trades blew up. As a result of the changes, requested by the OCC and the Federal Reserve Bank of New York, the Basel I Tier 1 common ratio was reduced to 9.9 percent from 10.3 percent.
So how big of a setback is all this?
JP Morgan will likely be able to recommence the buybacks soon, and the new capital levels are still significantly "higher than the 5 percent level at which banks are considered well-capitalized under Federal Reserve stress tests."
For some funds, however, the effects will linger a bit too long. At least a few hedge funds have liquidated their JPMorgan holdings. According to Bloomberg, Moore Capital Management sold all of its JPMorgan common shares — about 6.47 million — in the second quarter.
TPG-Axon Management sold all of its of 3.13 million shares. Hedge funds, mutual funds and other big asset managers reduced their holdings of JPMorgan stock by .7 billion, leaving them with .8 worth of stock.