Oct. 11: Rising legal costs push JPMorgan to rare loss
- Article by: STEVE ROTHWELL
- Associated Press
- October 19, 2013 - 9:30 PM
NEW YORK — JPMorgan Chase, the biggest U.S. bank by assets, reported a rare quarterly loss after setting up a big reserve for legal expenses.
The bank had to absorb a reserve for litigation expenses of $9.2 billion in the July-to-September period, pushing the lender to a loss of $380 million compared with a profit of $5.7 billion a year earlier.
While JPMorgan emerged from the global financial crisis and the subsequent Great Recession as one of the strongest U.S. banks, it has been dogged by lawsuits in recent years.
Last month, JPMorgan agreed to pay $920 million and admitted that it failed to oversee trading that led to a huge $6 billion loss last year — an episode known as the London Whale. The bank is also said to be discussing an $11 billion national settlement with the Department of Justice over mortgage-backed securities. The securities lost value after a bubble in the housing market burst and helped spur the financial crisis.
The bank said it had a total of $23 billion in reserves to cover potential litigation costs, a figure it said it hasn't disclosed before, including the $9.2 billion for the third quarter. JPMorgan CEO Jamie Dimon said that the amount reflected the "reality" the bank now faces but, speaking on a call with reporters, declined to give specifics on the legal costs it is anticipating.
"It's painful," Dimon said on a call with reporters. "But what's more important is the underlying performance of the company."
The bank posted a loss of 17 cents per share in the latest quarter, compared with net income of $1.40 per share a year earlier. Excluding charges, however, its adjusted earnings beat Wall Street expectations.
Its shares edged up in early trading Friday, rising 45 cents, or 1 percent, to $52.97
Excluding the litigation expense, it earned $5.8 billion, or $1.42 a share, in the quarter. That beat analysts' forecasts for earnings of the $1.19 a share, according to FactSet.
The banks' performance was bolstered by credit card sales and more deposits at its consumer banking unit. Net income at JPMorgan's investment banking division rose as expenses fell, and it reduced its reserves for losses on loans.
Overall bank revenue fell 8 percent, to $23.9 billion, missing analysts' estimate of $24.1 billion.
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