JPMorgan Chase reports Q3 loss as legal costs mount
Litigation and regulatory investigations lead to losses of $380 million at US bank
Jamie Dimon, chief executive officer of JPMorgan Chase, said he expected the bank’s litigation costs to abate and normalise over time. Photographer: Joshua Roberts/Bloomberg
JPMorgan Chase, the biggest US bank by assets, reported its first loss under chief executive Jamie Dimon after taking a $7.2 billion (€5.3 billion) charge to cover the cost of mounting litigation and regulatory probes.
The third-quarter loss was $380 million, or 17 cents a share, compared with a profit of $5.71 billion, or $1.40, a year earlier, the New York-based company said today.
Mr Dimon (57) who led JPMorgan to record earnings in each of the past three years, is grappling with regulatory investigations and tightening internal controls following its more than $6.2 billion trading loss last year.
The legal costs contributed to a 54 per cent surge in non-interest expenses to $23.6 billion, as revenue dropped 8 per cent from a year earlier.
“In this highly charged and unpredictable environment, with escalating demands and penalties from multiple government agencies, we thought it was prudent to significantly strengthen” the bank’s legal reserves, Mr Dimon said.
“While we expect our litigation costs should abate and normalise over time, they may continue to be volatile over the next several quarters.”
JPMorgan rose to $53.90 in New York trading from $52.52 at the close yesterday. Earnings adjusted for one-time items were $1.42 a share, exceeding the $1.30 average estimate of 20 analysts surveyed by Bloomberg.
The pretax legal charge was $9.2 billion, compared with $684 million a year earlier. Litigation reserves at the end of September were $23 billion, the bank said, adding that “reasonably possible” losses in excess of those reserves were $5.7 billion.
JPMorgan said on August 7th that its mortgage-bond sales practices were under criminal investigation by US prosecutors in California.
The company has been discussing a potential $11 billion deal with state and federal authorities to settle that case as well as other related investigations, a person with knowledge of the talks said last month.
The firm is also facing an investigation of its hiring practices in Asia and a criminal inquiry into its energy trading business.
The company agreed on September 19th to pay about $1.3 billion to resolve US and UK investigations into a record trading loss in 2012 and to settle unrelated claims it unfairly charged customers for credit-monitoring products.