Does JPMorgan Deserve This Upgrade?
With the worst of the storm behind it, JPMorgan Chase & Co. (NYSE:JPM) is beginning to look past the recent London Whale scandal that put the firm under the spotlight and painted it as the poster child for Wall Street irresponsibility. Although still working on shedding that image, Standard & Poor has raised its rating of JPMorgan from Negative to Stable, showing confidence and optimism that the firm will recover and move on in a more responsible way.
The bank “has successfully addressed our concerns regarding risk-management missteps in its chief investment office portfolio,” S&P said in a statement today about JPMorgan’s credit outlook. “Corrective actions should prevent additional issues from arising.”
According to a 300-plus page report from Senate Permanent Subcommittee on Investigations, Jamie Dimon — JPMorgan CEO — and other ranking executives “misled investors and dodged regulators as losses escalated on a “monstrous” derivatives bet,” Bloomberg reported.
The biggest U.S. bank “mischaracterized high-risk trading as hedging,” and withheld key information from its primary regulator, sometimes at Dimon’s behest, investigators found. Additionally, managers manipulated risk models and pressured traders to overvalue positions to hide growing losses.
S&P’s new rating reflects that “our expectation that further regulatory scrutiny will not result in additional egregious findings and that legal suits will not have a material impact on profitability or lead to significant senior management changes.”
More than 90,000 e-mails and documents, 200 transcribed telephone calls, and 25 interviews with bank officials included in the probe report could conceivably be used to pursue a case alleging that the bank officials broke the law. The probe is also expected to put more pressure on Dimon to surrender his role as chairman.
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