What has gone wrong with the private equity investments at JPMorgan Chase?
The bank reported today that its private equity division reported a net loss of $182 million for the first quarter, compared with profit of $134 million for the same period in the prior year. Net revenue was a loss of $276 million, compared with net revenue of $254 million in the prior year. The bank said these losses arose "primarily due to higher net valuation losses on private investments."
When you drill down into the supplementary financials, things get even worse. There JP Morgan reveals that it wrote down $327 million of something it vaguely calls "direct investments" in private equity.
This write down might not be massive compared to the total size of JPMorgan, which is the nation's largest bank. But it is significant in terms of the bank's private equity portfolio. The bank says it has around $5 billion of private securities in the portfolio and $578 million of public securities. So a $327 million loss means the portfolio's value shrank nearly 6 percent in the first quarter of the year.
That this happened while the stock market soared makes it even stranger.
Unfortunately, JPMorgan won't shed any light on what it is that went so wrong in this corner of the bank.
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