JPMorgan Sold $25B in Securities to Mask Loss

But analysts say it was a dumb move
By Evann Gastaldo,  Newser Staff
Posted May 29, 2012 8:41 AM CDT
JP Morgan Chase Chairman Jamie Dimon speaks at the 21st annual 'Salute to Freedom' dinner at the Intrepid Sea, Air and Space Museum on May 24, 2012 in New York City.   (Getty Images)

(Newser) – In order to soften the Q2 earnings blow inflicted by its more than $2 billion loss, JPMorgan is "dipping into the cookie jar," Reuters reports. Earlier this month CEO Jamie Dimon revealed that the bank had sold securities that generated $1 billion in gains, and a Reuters analysis breaks down the math: The bank sold an estimated $25 billion in profitable securities in order to generate gains of that size, it calculates, and analysts are calling it a bad move. "They really made two stupid decisions," says one: They took risks with derivatives they didn't understand, and they sold "assets with high income that they can't replace."

Plus, JPMorgan will have to pay an estimated $380 million in taxes on the gains, according to the analysis, which calculates that the net gain is just $620 million, or 16 cents per share. (Earnings of 90 cents a share are expected for the quarter.) Jamie Dimon himself highlighted the "tax inefficiency" of making such a move in the May 10 talk to analysts, but the bank is under pressure to show profits, especially considering total losses from the London Whale debacle could go past $5 billion.

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