JPMorgan Chase, the largest bank in the United States, says it has lost $2bn in the past six weeks on a trading portfolio designed to hedge against risks the company takes with its own money.
The company's stock plunged almost seven per cent in after-hours trading after the loss was announced. Other bank stocks, including Citigroup and Bank of America, suffered heavy losses as well.
"The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought," CEO Jamie Dimon told reporters. "There were many errors, sloppiness and bad judgment."
The trading loss is an embarrassment for a bank that came through the 2008 financial crisis in much better health than its peers. It kept clear of risky investments that hurt many other banks.