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J.P. Morgan loss may reportedly hit $9 billion

NEW YORK (MarketWatch) -- Shares of J.P. Morgan Chase & Co. fell on Thursday after a newspaper reported that the trading loss suffered by the bank could potentially amount to $9 billion in a worst-case scenario -- much more than previously estimated.

The bank's trading loss resulted from a soured bet on complex credit derivatives undertaken by its chief investment office in London.

The New York Times, citing unnamed sources it described as having been briefed on the situation, reported Thursday that an internal report produced in April by J.P. Morgan Chase (JPM) showed that the bank's trading loss could hit between $8 and $9 billion under the worst possible conditions.

The newspaper also reported that some expect that the loss will not exceed the $6 billion-to-$7 billion range. It also said that the bank has already exited more than half of the trading position.

Contacted by MarketWatch, a J.P. Morgan Chase spokesman declined to comment on the report early Thursday.

If the report is accurate, the trading loss would well exceed the $2 billion figure that Chief Executive Jamie Dimon first revealed in early May.

At the time, Dimon cautioned that the loss could mount as the bank moved ahead with unwinding its position. However, the CEO has insisted that the bank remains profitable and still boasts what he has called a fortress balance sheet. Dimon testified before Congress on the matter earlier this month. See earlier story about J.P. Morgan's so-called London Whale.

Christopher Mutascio, an analyst at Stifel Nicolaus, said that if the $9 billion figure is accurate and is incurred in the second quarter, "it is hard to believe the company will be 'solidly profitable' this quarter, as previously indicated by management."

Over the past several quarters, the bank has posted net-income figures ranging from $3.5 billion to $5 billion after preferred dividends, Mutascio wrote in a note to clients. "If the $9 billion is spread out over a few quarters, then the company could still remain profitable on a quarterly basis," he added.

Shares of J.P. Morgan dropped 2.5% to end at $35.88. They have fallen nearly 23% over the past three months.

The bank is scheduled to report its second-quarter earnings on July 13.