What is the financial impact of the restatement on JPMorgan Chase's Q1 2012 net income?

The restatement will reduce JPMorgan Chase's reported net income for the first quarter of 2012 by $459 million. This adjustment will bring the previously reported net income of $5,383 million down to $4,924 million.

Will this restatement affect the company's overall year-to-date financial performance?

No, the company stated that its year-to-date principal transactions revenue, total net revenue, and net income will remain unchanged as a result of this restatement. The reduction in Q1 net income is expected to be offset by a corresponding reduction in losses recognized in Q2 2012 from the same portfolio.

What is the impact of this restatement on JPMorgan Chase's capital ratios?

The restatement will have a modest impact on the company's capital ratios as of March 31, 2012. The Basel I Tier 1 common ratio will be reduced by 4 basis points to 10.3%, and the Estimated Basel III Tier 1 common ratio will be reduced by 3 basis points to 8.1%.

JPM 8-K: Earnings & Results & Financial Events

Q: What is the primary reason for JPMorgan Chase restating its Q1 2012 financial statements?

JPMorgan Chase is restating its Q1 2012 financial statements because it determined that the previously reported valuations of certain positions within the Chief Investment Office's (CIO) synthetic credit portfolio were not reliable. Concerns were raised that individuals may have attempted to avoid showing the full extent of losses incurred in that portfolio during the first quarter.

Summary

JPMorgan Chase & Co. (JPM) filed an 8-K on July 13, 2012, to announce that it will restate its first-quarter 2012 financial statements. The restatement is due to a determination that previously reported valuations of certain positions within the Chief Investment Office's (CIO) synthetic credit portfolio were unreliable. The company's management, in conjunction with the Audit Committee, identified that certain individuals may have sought to understate losses. This restatement will reduce the reported net income for Q1 2012 by $459 million. Despite the restatement, JPMorgan Chase stated that its year-to-date principal transactions revenue, total net revenue, and net income will remain unchanged. This is because the identified Q1 losses will be offset by a corresponding reduction in Q2 losses within the same portfolio. However, the restatement does impact key capital ratios, reducing the Basel I Tier 1 common ratio by 4 basis points and the Estimated Basel III Tier 1 common ratio by 3 basis points as of March 31, 2012. A material weakness in internal controls over financial reporting related to the valuation of this synthetic credit portfolio was also identified.

Key Highlights

1JPMorgan Chase & Co. will restate its Q1 2012 financial statements due to issues with synthetic credit portfolio valuations.
2Reported net income for Q1 2012 will be reduced by $459 million.
3The restatement relates to concerns about the integrity of trader marks and potential underreporting of losses in the Chief Investment Office's (CIO) synthetic credit portfolio.
4Year-to-date principal transactions revenue, total net revenue, and net income remain unchanged by the restatement.
5The restatement results in a 4 basis point reduction in the Basel I Tier 1 common ratio and a 3 basis point reduction in the Estimated Basel III Tier 1 common ratio as of March 31, 2012.
6A material weakness in internal controls over financial reporting for the CIO's synthetic credit portfolio valuation was identified.
7The control deficiencies were substantially remediated by June 30, 2012.

JPMORGAN CHASE & CO 8-K Report, Financial Results (Jul 13, 2012)

Summary

Key Highlights

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