David Olson, the former head of credit trading for JPMorgan (JPM:US) Chase & Co.’s chief investment office in North America, joined Citigroup Inc. (C:US)’s bond-trading unit, according to people familiar with the matter.
Olson started yesterday and reports to David Cohen, head of investment-grade bond trading for New York-based Citigroup in North America, according to the people, who asked not to be named because the matter isn’t public. He will run the hybrids and preferred securities trading desk.
Olson, a former U.S. Navy nuclear submarine pilot, left JPMorgan in December, about five months before the bank disclosed at least $2 billion in losses from the CIO’s London operation. JPMorgan Chief Executive Officer Jamie Dimon pushed the unit to seek profits by speculating on higher-yield assets such as credit derivatives before the bets soured, according to executives who used to work at the company. Olson’s former colleague in London, Bruno Iksil, is known as the London Whale because his bets were so large.
In 2008, JPMorgan’s CIO lost $1 billion on securities tied to Fannie Mae and Freddie Mac when the government-backed mortgage agencies were put into conservatorship. Olson has said the only reason he wasn’t fired at the time was because Dimon had been “intimately familiar with those positions.”
JPMorgan, the biggest U.S. bank, may announce a $3.46 billion second-quarter profit on July 13, according to the average estimate (JPM:US) of 11 analysts surveyed by Bloomberg. Dimon will lead a two-hour conference call with analysts to discuss the trading loss, which he said May 10 may be $3 billion or more. Analysts including Charles Peabody at Portales Partners LLC in New York estimate the loss at about $5 billion.
Olson joins Citigroup’s credit-trading team as the firm grapples with the European sovereign debt crisis. Chief Executive Officer Vikram Pandit shook up the unit in January, causing senior debt traders Rohit Bansal and Chris Yanney to leave the bank, the third-biggest in the U.S.
The average daily trading volume for investment-grade bonds in June fell 7 percent from a year earlier, David Trone, a JMP Securities LLC analyst, told clients in a July 2 note.
“Credit trends stabilized during the month but have deteriorated since the end of 1Q12,” according to Trone, who has a sell rating (C:US) on Citigroup shares. The profits and share prices of Wall Street firms will fall over the rest of year “due to a confluence of material events, both at home and abroad, led by an increasingly troublesome situation in Europe,” he said.
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