JPMorgan Chase (NYSE:JPM) and everyone's favorite Whale are back in the news today and if you're a shareholder, the news isn't what you want to hear. Recall that way back on May 21, Jamie Dimon said that by the fourth quarter of this year no one would be talking about the CIO losses anymore--this sentiment has been echoed by a number of JPMorgan supporters as the "tempest in a teapot" assertion lives on in spirit even after Mr. Dimon retracted it before Congress.
One internal investigation, three possible scapegoats (Iksil, Martin-Artajo, and Macris), and one restated first quarter VaR later and the thorny little multi-billion dollar loss just doesn't want to go away. On Thursday, the bank filed its amended first-quarter 10Q, which now shows the bank earned $4.92 billion during the period, $459 million less than it reported originally. The bank now says it earned $1.19 per share during the quarter compared with the originally reported $1.31.
Of course, if you read the 8K the company filed before it released second-quarter earnings, this won't come as any surprise. What may be a bit unexpected however is that the firm said Thursday it now expects the resumption of share buybacks to be delayed by at least three months. Previously, Dimon indicated that he expected share repurchases to resume during the fourth quarter, but the firm now says only that it "hopes" to restart the program in the first quarter of 2013.
This of course virtually assures that people will indeed still be talking about the Whale into and past the fourth quarter of this year and investors shouldn't expect this issue to just disappear. Recently, the Wall Street Journal reported that the bank's internal probes suggest Javier Martin-Artajo (an executive) prodded Bruno Iksil to mismark the unit's CDS book. Mr. Martin-Artajo vehemently denies the allegations and the probe is ongoing.
Shareholders are essentially being asked to trust that nothing will come out in the course of the investigation that will implicate anyone other than a few bad apples at the CIO office. This seems like a leap of faith considering the backtracking the firm has already done in regards to the loss. Consider also that although the losses on the trade totaled "only" $5.8 billion in the second quarter (triple the firm's original estimate), investors were warned that not all the losses had been booked. Between these concerns and banks' reduced ability to earn in the new regulatory climate, I see very little reason to own these shares. I would advise investors to find somewhere to park their money other than shares of JPMorgan. If you're the enterprising type, you might even short the shares on the notion that future whale-related revelations will result in a precipitous decline.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.