US banking giant JPMorgan Chase on Friday reported a rare quarterly loss due to high legal costs, even as its underlying business produced results that bested expectations.
The bank reported a net loss of US$380 million on revenues of US$23.12 billion, due in large part to a US$9.15 billion charge for legal expenses following a series of regulatory problems. The loss was the company’s first since the second quarter of 2004. However, when the special items were stripped away, the bank earned US$1.42 per share, US$0.21 above expectations.
JPMorgan chief executive Jamie Dimon said the results demonstrated “strong underlying performance across the businesses,” but that financials were “marred by large legal expenses.”
JPMorgan is attempting to simplify its businesses and resolve a number of regulatory issues as it copes with what it describes as an “unprecedented” amount of scrutiny. The bank emerged from the financial crisis in good shape, but it has come under fire in the era of debate over institutions that are “too big to fail.”
JPMorgan chief financial officer Marianne Lake described the company’s efforts to estimate its legal exposure as difficult given “the rapidly evolving, fluid and volatile nature of the environment.”
JPMorgan officials were reportedly shocked by the government’s expectations regarding the size of a settlement to resolve violations relating to mortgage-backed securities prior to the housing bust.
A source said last month the discussions center on an US$11 billion payment. Bank officials on Friday declined to comment on this figure.
The company is pushing for a “fair and reasonable settlement” on mortgage-related issues. It said that some of the problems stem from its acquisitions of Bear Stearns and Washington Mutual during the financial crisis that were undertaken “at the request or encouragement of the US government.”
“I wish we could reduce the uncertainty for investors, but we can’t,” Dimon said of the current estimate on legal costs.
The additional US$9.15 billion in legal reserves take JPMorgan’s overall pot of money to resolve litigation to US$23 billion.
Dimon said “a lot” of this sum is expected to go to mortgages, but that the sum includes other regulatory and legal issues.
Last month JPMorgan signed off on a US$920 million settlement to resolve some civil charges related to the “London whale” debacle, during which the company lost US$6.2 billion in errant and poorly managed trades.
The bank in July also agreed to pay US$410 million in penalties to resolve charges it manipulated some US electricity markets.