Enron exposure hurts JP Morgan credit position

The move falls well short of an actual downgrade, but S&P identified a number of factors that, taken together, led to its action. Most notable was JP Morgan Chase’s "large concentration of exposure to Enron and modest Argentine exposure".

Other factors included losses in the firm’s private equity portfolio and a need to downsize following the merger of JP Morgan and Chase Manhattan in December 2000. "Revenue trends have proven disappointing," said S&P. JP Morgan Chase is one of the world’s largest sellers of over-the-counter derivatives.

Commenting on the bank’s exposure to private equity investments, Enron and Argentina, JP Morgan Chase chairman and chief executive William Harrison said: "In this quarter we have moved aggressively to value those exposures, to market, and to build loan loss reserves. While these actions hinder current operating results, they lay the groundwork for stronger earnings recovery when market conditions improve."

Tanya Azarchs, banking analyst at S&P in New York, said a negative outlook does not mean that a rating downgrade is imminent. "It means there may be certain trends that we need to watch for, for anything up to the next three years, that could result in a downgrade." Broker-dealing firms such as Goldman Sachs, Morgan Stanley and Merrill Lynch are also on negative outlook by S&P.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here