JPMorgan Hit By Legal Costs, Dimon Says Banks 'Under Assault'
JPMorgan Chase & Co, the biggest U.S. bank by assets, reported a 6.6 percent drop in quarterly profit as legal costs exceeded $1 billion in the wake of government probes, leading Chief Executive Jamie Dimon to claim banks were “under assault.”
JPMorgan 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, including alleged manipulation of Libor interest rates, are continuing.
“Banks are under assault,” Dimon said on a conference call with reporters on Wednesday, responding to a question about the bank's legal costs.
“We have five or six regulators coming at us on every issue.”
“Obviously companies make mistakes. We try to resolve it, we try to fix it, we admit it,” he said.
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.
Apart from legal costs, JPMorgan's earnings were hit by a 14 percent fall in revenue from fixed-income trading, after adjusting for the sale of the bank's physical commodities business and accounting changes.
The results from JPMorgan are a pointer to the performance of its competitors, which are also struggling to adjust to stricter trading rules in the aftermath of the financial crisis.
Like other banks, JPMorgan has also been investing heavily to improve risk controls and system security.
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.
Net income fell to $4.93 billion, or $1.19 per share, from $5.28 billion, or $1.30 per share. Revenue on a managed basis fell 2.3 percent to $23.55 billion. Analysts on average had expected earnings of $1.31 per share on revenue of $23.64 billion, according to Thomson Reuters I/B/E/S.
The bank's shares fell 4.3 percent.
JPMorgan's exposure to oil price declines is manageable, Chief Financial Officer Marianne Lake said on the call.
Dimon was asked if the bank should be broken up – an argument put by Goldman Sachs analysts earlier this month.
(“That) would be extraordinarily complex,” he said, adding that having a wide array of businesses helped cushion the bank against difficulties in any particular sector.
“The model works from a business standpoint and yes, we'll have to carry more capital and we'll manage that over time.”
Revenue from home loans fell by $405 million to $1.9 billion. Wells Fargo & Co, the biggest U.S. mortgage lender, also reported a fall in mortgage lending on Wednesday but its profit rose slightly.