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.

News
news

Emergency call 'started off dumb, but got pretty serious'

News
people

Britain First criticised for using actress's memory to draw attention to their 'hate-filled home page'

News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
people

Thought you'd seen it all after the Jeremy Paxman interview?

Arts and Entertainment
On The Apprentice, “serious” left the room many moons ago and yet still we watch
tv

Greatest mystery about the hit BBC1 show is how it continues to be made at all, writes Grace Dent

PROMOTED VIDEO
Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into conflicts
Arts and Entertainment
A scene from David Ayer's 'Fury'
film

"History is violent," says the US Army tank commander Don "Wardaddy" Collier

Arts and Entertainment
Liam and Zayn of One Direction play with a chimpanzee on the set of their new video for 'Steal My Girl'
music

Animal welfare charities have urged the boy band to cut the scenes

News
The Edge and his wife, Morleigh Steinberg, at the Academy Awards in 2014
peopleGuitarist faces protests over plan to build mansions in Malibu
News
peopleFox presenter gives her less than favourable view of women in politics
News
George Clooney and Amal Alamuddin married in Venice yesterday
peopleAmal and George Clooney 'planning third celebration in England'
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Keira Knightley at the premiere of Laggie at Toronto Film Festival 2014
theatreActress 'to make Broadway debut'
Property
One bedroom terraced house for sale, Richmond Avenue, Islington, London N1. On with Winkworths for £275,000.
property
Sport
Erik Lamela celebrates his goal
football

Argentinian scored 'rabona' wonder goal for Tottenham in Europa League – see it here

Voices
Nigel Farage has backed DJ Mike Read's new Ukip song
voicesNigel Farage: Where is the Left’s outrage over the sexual abuse of girls in the North of England?
News
i100
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

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

CTO / Chief Technology Officer

£100 - 125k: Guru Careers: A CTO / Chief Technology Officer is needed to join ...

COO / Chief Operating Officer

Competitive (DOE): Guru Careers: A COO / Chief Operating Officer is needed to ...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker