JP Morgan chief counts the cost of 'London Whale' loss as bonus is cut by half

Directors say he held 'ultimate responsibility' for trading blunder

The “London Whale” loss has swallowed half of Jamie Dimon's pay, with the JP Morgan Chase chief executive losing his crown as Wall Street's highest-paid bank boss as a result of the $6.2bn (£3.8bn) trading blunder.

The bank's profits during the final quarter of 2012 rose by more than 50 per cent, according to an update today, but Mr Dimon's pay package plummeted after the company's directors concluded that he bore "ultimate responsibility for the failures" connected to the ill-fated bets placed by Bruno Iksil, the trader nicknamed the London Whale.

Mr Dimon, who earned $23m for 2011, making him the top-earning bank chief on Wall Street, will be paid $11.5m for 2012. His base salary, at $1.5m, remains the same, but the loss means his bonus has gone from $21.5m for 2011 to $10.5m for last year.

The board has also delayed valuable share options which were awarded to Mr Dimon in 2008 – which he could have cashed in later this month – until July 2014.

The investigation found that the losses, which involved outsized credit derivatives positions that Mr Iksil took for the bank's chief investment office, the division responsible for investing and managing excess cash, seriously damaged JP Morgan's reputation and has led to a series of court cases against it. Earlier this week US regulators ordered the bank to tighten its controls.

A report into the blunder by a management task force, while holding Mr Dimon to account, put much of the blame on a triumvirate of senior executives. The former chief investment officer, Ina Drew, was blamed for failing to properly oversee the trades, while the former head of risk, Barry Zubrow, took the blame for failures in the way the risk operation was set up. Former chief financial officer Douglas Braunstein was also blamed for weakness in financial controls.

It emerged last night that the bank had reached an out-of-court settlement with Mr Iksil's former boss, Javier Martin-Artajo, who had been named as a defendant in a case filed by the bank in the High Court in London in October. The legal move had come after the bank said it would attempt to claw pay money from those whom it held responsible for the blunder. Today, a source familiar with the case told Reuters that the action against Mr Martin-Artajo had been settled, though no further details were available.

With attention in the post-financial crisis world increasingly focused on whether the promise of big bonuses drives traders to make risky bets, the JP Morgan task force said it had "considered whether compensation might have played a role in these matters". But after spending about eight months scrutinising the blunder, it claims to have found that "the firm's compensation system did not unduly incentivise the trading activity that led to the losses".

Initially dismissed by Mr Dimon as nothing more than a "tempest in a teapot", the loss fed calls for greater regulation of banks in the post-crisis world. But not long afterwards, as more details emerged, Mr Dimon admitted that his initially assessment was "dead wrong". Today, he said the blunder was "one huge, embarrassing mistake".

Despite the London Whale losses, JP Morgan posted its third consecutive year of record profits, with after-tax income rising from $19bn to $21.3bn on flat revenues of $99.9bn. In the fourth quarter, net income stood at $5.7bn, up more than 50 per cent, on revenues of $24.4bn as the mortgage market continued to improve. Announcing the figures, Mr Dimon, who in a conference call said he respects the board's decision to halve his pay, spoke of "favourable credit conditions across our wholesale loan portfolios and strong credit performance in our credit-card portfolio".

The Nomura banking analyst Glenn Schorr said: "All in, we think it's a good quarter for [JP Morgan], and underscores their solid earnings power. Solid earnings progression, capital build & return and reasonable valuation should make '13 another good year in the stock."

In a filing with the US Securities and Exchange Commission, where it disclosed Mr Dimon's pay cut, the JP Morgan board said that while he shouldered some of the blame, he had acted swiftly once he became aware of the gravity of the situation.

"Importantly, once Mr Dimon became aware of the seriousness of the issues presented by the CIO (chief information officer), he responded forcefully by directing a thorough review and an extensive program of remediation," read the bank's statement.

PROMOTED VIDEO
Extras
indybest
Travel
Flocking round: Beyoncé, Madame Tussauds' latest waxwork, looking fierce in the park
travelIn a digital age when we have more access than ever to the stars, why are waxworks still pulling in crowds?
Arts and Entertainment
tv
Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Sport
Is this how Mario Balotelli will cruise into Liverpool?
football
News
Ronahi Serhat, a PKK fighter, in the Qandil Mountains in Iraqi Kurdistan
i100
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Poet’s corner: Philip Larkin at the venetian window of his home in 1958
booksOr caring, playful man who lived for others? A new book has the answer
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
art
News
Matthew McConaughey and his son Levi at the game between the Boston Red Sox and the Houston Astros at Fenway Park on August 17, 2014 in Boston, Massachusetts.
advertisingOscar-winner’s Lincoln deal is latest in a lucrative ad production line
Life and Style
Pick of the bunch: Sudi Pigott puts together roasted tomatoes with peppers, aubergines and Labneh cheese for a tomato-inspired vegetarian main dish
food + drink
Arts and Entertainment
Alfred Molina, left, and John Lithgow in a scene from 'Love Is Strange'
film
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Junior Quant Analyst - C++, Boost, Data Mining

£25000 - £35000 per annum: Harrington Starr: Junior Quant Analyst - C++, Boost...

Service Desk Analyst- (Desktop Support, Help desk)

£25000 - £35000 per annum: Harrington Starr: Service Desk Analyst- (Desktop Su...

Junior Quant Analyst (Machine Learning, SQL, Brokerage)

£30000 - £50000 per annum: Harrington Starr: Junior Quant Analyst (Machine Lea...

UNIX Application Support Analyst- Support, UNIX, London

£45000 - £55000 per annum: Harrington Starr: UNIX Application Support Analyst-...

Day In a Page

Air strikes? Talk of God? Obama is following the jihadists’ script

Air strikes? Talk of God? Obama is following the jihadists’ script

The President came the nearest he has come yet to rivalling George W Bush’s gormless reaction to 9/11 , says Robert Fisk
Ebola outbreak: Billy Graham’s son declares righteous war on the virus

Billy Graham’s son declares righteous war on Ebola

A Christian charity’s efforts to save missionaries trapped in Africa by the crisis have been justifiably praised. But doubts remain about its evangelical motives
Jeremy Clarkson 'does not see a problem' with his racist language on Top Gear, says BBC

Not even Jeremy Clarkson is bigger than the BBC, says TV boss

Corporation’s head of television confirms ‘Top Gear’ host was warned about racist language
Nick Clegg the movie: Channel 4 to air Coalition drama showing Lib Dem leader's rise

Nick Clegg the movie

Channel 4 to air Coalition drama showing Lib Dem leader's rise
Philip Larkin: Misogynist, racist, miserable? Or caring, playful man who lived for others?

Philip Larkin: What will survive of him?

Larkin's reputation has taken a knocking. But a new book by James Booth argues that the poet was affectionate, witty, entertaining and kind, as hitherto unseen letters, sketches and 'selfies' reveal
Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?

Waxing lyrical

Madame Tussauds has shown off its Beyoncé waxwork in Regent's Park - but why is the tourist attraction still pulling in the crowds?
Texas forensic astronomer finally pinpoints the exact birth of impressionism

Revealed (to the minute)

The precise time when impressionism was born
From slow-roasted to sugar-cured: how to make the most of the British tomato season

Make the most of British tomatoes

The British crop is at its tastiest and most abundant. Sudi Pigott shares her favourite recipes
10 best men's skincare products

Face it: 10 best men's skincare products

Oscar Quine cleanses, tones and moisturises to find skin-savers blokes will be proud to display on the bathroom shelf
Malky Mackay allegations: Malky Mackay, Iain Moody and another grim day for English football

Mackay, Moody and another grim day for English football

The latest shocking claims do nothing to dispel the image that some in the game on these shores exist in a time warp, laments Sam Wallace
La Liga analysis: Will Barcelona's hopes go out of the window?

Will Barcelona's hopes go out of the window?

Pete Jenson starts his preview of the Spanish season, which begins on Saturday, by explaining how Fifa’s transfer ban will affect the Catalans
Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape