JPMorgan Chase & Co. has been facing regulatory and legal challenges since it suffered billions of dollars in losses resulting from the London Whale debacle. Last Friday, the US largest bank announced that its legal expenses have wiped out its third quarter profits.
The bank announced a loss of $380 million or 17 cents per share. It was charged with a $9.15 billion pre-tax litigation expense as compared to just $600 million in the second quarter. In the same quarter last year, it got profits of $5.71 billion or $1.40 per share. JPMorgan got revenue of $23.9 billion, compared with $25.9 billion in the previous year.
JPMorgan has been in talks with the Justice Department regarding its role in the mortgage market that could produce a deal in the $11 billion range. The bank recently agreed to pay $920 million in fines to regulators from the US and UK for engaging in unsafe practices connected to the $6 billion of losses it got from the London Whale trade.
The bank tried to sell its big physical commodities business because of the resulting political pressure. JPMorgan also planned on increasing its litigation reserves by at least $1.5 billion in the last quarter of 2013. At present, JPMorgan’s litigation fund is at $23 billion.
According to JPMorgan Chase’s Chief Executive Jamie Dimon, the bank had strong performance across its businesses but the third quarter was marred by the large legal expense. HE added that the bank would continuous to evaluate its legal reserves but they thought it was prudent to increase the reserves due to the unpredictable environment with the increasing penalties from several government agencies.
It looks like JPMorgan Chase’s legal problems would not be going away soon but investors are more optimistic about the bank’s future. JPMorgan shares gained slightly during trading last Friday.