JPMorgan profit falls 6.6 per cent as legal costs exceed $1bn

JPMorgan Chase, the biggest US bank by assets, reported a 6.6 per cent drop in quarterly profit as legal costs exceeded $1 billion (€847 million) in the wake of government investigations into alleged wrongdoing and revenue from fixed-income trading fell.

The bank agreed in November to pay $1 billion in penalties over its conduct in foreign exchange markets. Investigations into that and other areas of the bank’s business are continuing.

However, while legal expenses rose to $1.1 billion in the fourth quarter, from $847 million in the same quarter last year, total legal costs of $2.9 billion for the year were far less than the $11.1 billion recorded in 2013.

Profit last year was hit by government penalties for failing to report suspicions of fraud by Ponzi-schemer Bernie Madoff.

Revenue from fixed-income trading fell 23 per cent to $2.5 billion. Taking into account the sale of the bank’s physical commodities business and accounting changes, revenue fell 14 per cent.

Net income fell to $4.93 billion, or $1.19 per share, from $5.28 billion, or $1.30 per share a year earlier. Revenue on a managed basis fell 2.3 percent to $23.55 billion.

Revenue from home loans fell by $405 million to $1.9 billion while investment banking fees rose 8 per cent to $1.8 billion, driven by record debt underwriting fees of $1.1 billion.

JPMorgan, the first big US bank to report quarterly results, said it paid its investment bank employees 27 per cent of revenue in 2014, down from 33 per cent in 2013, in a record year for both IPOs and mergers and acquisitions.

Apart from litigation costs, big US banks have been constrained by a long period of historically low interest rates.

Like other banks, JPMorgan has also been investing heavily to improve risk controls and system security and to comply with stricter capital rules in the aftermath of the financial crisis.

The bank revealed in October that names, addresses, phone numbers and email addresses of the holders of about 83 million accounts were exposed when its systems were hacked.

News also emerged last month that regulators may require JPMorgan to increase its capital by about $20 billion because of the complexity and size of its operations.

Reuters