Whitney Downgrades JPMorgan, Says Move Was 'Long Time Coming'

Tuesday, 03 Jul 2012 05:18 PM

By Forrest Jones

Star Wall Street analyst Meredith Whitney, who called the housing collapse long before it happened, has downgraded JPMorgan Chase to a hold recommendation, saying the decision had been "a long time coming."

JPMorgan recently disclosed a trading loss at an investment office, which could cost the bank at least $2 billion, according to initial estimates.

"It wasn't the right time to do it when the company announced a $2 billion write-down and the stock was down precipitously at that time," Whitney tells CNBC.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

The stock has rallied 17 percent and is now trading above its tangible book value, which made the timing good now.

"This was the only large-cap bank stock we had recommended and now it is more in line with the negative stance on the group," Whitney says.

The New York Times recently reported the trading loss could climb as high as $9 billion once the dust settles.

The loss took place at the bank's Chief Investment Office (CIO) in London, and the bank's CEO Jamie Dimon has said traders at the unit weren't aware of the risks they were taking when their actions were supposed to be hedging, in other words, making trades to cover for any losses at other divisions within the financial institution.

"The strategy was not carefully analyzed or subjected to rigorous stress testing within CIO and was not reviewed outside CIO," Dimon told a House Finance Committee hearing, according to the AFP newswire.

"In hindsight, CIO's traders did not have the requisite understanding of the risks they took."

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video