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What: Shares of JPMorgan Chase (NYS: JPM) sank as low as 10% on Friday after the banking giant disclosed a massive $2 billion trading loss at a London trading unit.
So what: In addition to the huge financial hit, the news deals a significant blow to JPMorgan's reputation: It had come out of the mortgage crisis as one of the relatively healthy big banks. The news is even reigniting worries about the possibility of big losses at other banks like Morgan Stanley (NYS: MS) and Goldman Sachs (NYS: GS) , both of which are also down significantly today.
Now what: For the current quarter, JPMorgan said it now expects to take a loss of $800 million in its corporate and private equity segment (versus its previous view of a $200 million profit), which will naturally weigh on overall earnings. "We will admit it, we will learn from it, we will fix it, and we will move on," CEO Jamie Dimon said in a conference call with analysts. Of course, given the possibility of even further losses as management tries to unload the position, don't expect Mr. Market to move on quite as quickly.
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At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool owns shares of JPMorgan. Motley Fool newsletter services have recommended buying shares of Goldman Sachs. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.
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