J P Morgan

JPMorgan Chase & Co. (JPM), the largest U.S. bank, may report a $4.2 billion second-quarter trading loss in its chief investment office, according to an estimate by International Strategy & Investment Group Inc.

The pretax loss would help cut second-quarter earnings to 65 cents a share, a 30 percent decline from an earlier estimate of 93 cents, Ed Najarian, an ISI analyst, said in a note yesterday. Weaker-than-expected trading and investment banking revenue coupled with mark-to-market private-equity losses will also weigh on results, Najarian said.

JPMorgan Chief Executive Officer Jamie Dimon, 56, said last month the firm lost about $2 billion on trades conducted at its CIO unit, which is charged with managing the bank’s idle cash to earn a profit while minimizing risk. Dimon has said losses could grow and it might take the rest of the year to liquidate the New York-based lender’s trades.

The loss will be “partially offset” by $2 billion in realized security gains, stronger mortgage-banking revenue and so-called debt-valuation adjustments, Najarian wrote. Excluding the trading losses, DVA and securities gains, Najarian estimates second quarter operating earnings per share of 82 cents.

Najarian cut his 12-month price target to $47 a share, from $52, and kept a rating of “buy” on the stock. JPMorgan fell 2.9 percent yesterday to $31 and is down 6.8 percent this year. Kristin Lemkau, a JPMorgan spokeswoman, declined to comment.