'Whale' to sink bank's bonuses

London trader's $2bn losses are expected to force JP Morgan to reduce this year's financial rewards

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The Independent Online

Bankers at JP Morgan fear that as much as 50 per cent could be wiped off their bonuses this year as a result of Thursday's "London Whale" trading scandal.

The US giant had emerged relatively unscathed from the financial crisis and paid 26,000 bankers a pay and bonus pot of £5.8bn last year – £223,000 each.

However, last week it emerged that it had not escaped the worst excesses of the credit crunch, when it was confirmed that London-based Bruno Michel Iksil was behind trades that led to at least $2bn (£1.2bn) of losses.

The revelations are also expected to lead to questions over the chief executive Jamie Dimon's $23m package for 2011 at Tuesday's annual shareholder meeting.

Mr Iksil was nicknamed both the London Whale and Lord Voldemort due to the size of his bets and his power in the market after taking financial positions amounting to $100bn.

Senior JP Morgan bankers said they feared that the losses would result in heavy cuts to their bonuses. The bank pays out from a pot across the group, rather than paying out on the successes by division.

One senior rainmaker said: "This will all get tied up into what we get paid, as it will obviously impact our year-end results. We're all disappointed, not least because of doing such an incredible job of getting through the crisis in a way that built us a reputation as very astute risk managers."

Another senior figure told The Independent on Sunday that Mr Iksil's actions were "bloody annoying" and said that it was "probably quite likely" that the 2012 bonus pool would be halved.

He added: "It's a bit of a knock for Dimon. He's the guy who said that we can manage our own risk [without excessive regulation in the wake of the credit crunch], but clearly we can't manage our own risk. However, we had a good five or six years and to think we could keep going without a bump was probably naïve."

Mr Dimon has blamed the hit on "sloppiness and bad judgement" and has also admitted that more losses could follow. On Friday, the bank's shares fell 9.3 per cent, Fitch downgraded its credit rating by one notch, and regulators confirmed they were looking into the matter.

JP Morgan had grown to become the biggest US bank by assets last year, though nearly half its bankers are based in London. Mr Dimon was handsomely rewarded for the bank's record $19bn profit last year. He was given around $23m in pay, bonus and stock.