JPMorgan - rivals closing the gap

Mind the Gap - Suserl

JPMorgan’s advantage over its Wall Street peers is fading in the eyes of credit-derivatives traders as fines and regulator probes hobble profits while firms from Citigroup to Morgan Stanley rebound.

Bloomberg reports that Credit-default swaps traders are demanding 16 basis points less to protect against losses on JPMorgan bonds than the average cost to insure debt of the bank’s five-biggest U.S. rivals, according to prices compiled by Bloomberg.

The gap, a measure of the bank’s credit strength relative to its competitors, has narrowed from an average 80 basis points since 2008 and 152 in April 2012, the month before JPMorgan disclosed a trading loss that reached $6.2bn.

With regulatory fines and penalties that are poised to approach $15bn, the playing field is leveling between the only Wall Street bank to stay profitable through the financial crisis and rivals that the credit seizure pushed to the edge of failure. Swaps tied to Citigroup, which last month removed the final vestiges of its government bailout, narrowed to within 6 basis points of JPMorgan’s for the first time since 2007.

'It’s JPMorgan’s turn to have its own types of concerns, albeit ones that are much less severe from a credit perspective than the others' and in an improved economy, said Pri De Silva, a bank analyst at debt-research firm CreditSights in New York. For lenders such as Citigroup, Bank of America and Morgan Stanley, 'the balance sheets are in much better shape now compared with credit-crisis days', he said.

To access the complete Bloomberg article hit the link below

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