JPMorgan Chase JPM +1.1% & Co. has been under legal and regulatory siege ever since the nation’s biggest bank suffered billions of dollars in losses in the London Whale debacle and on Friday JPMorgan announced that the legal monster had completely wiped out its third-quarter profits.
JPMorgan announced a loss of $380 million, 17 cents a share, after it recorded a $9.15 billion pre-tax litigation expense, compared to $600 million in the previous quarter. A year ago the bank had reported third-quarter profits of $5.71 billion, or $1.40 per share. It reported revenue of $23.9 billion, compared with $25.9 billion in the period a year earlier.
JPMorgan is in negotiations with the Justice Department over its role in the mortgage market that could produce a settlement in the $11 billion range and recently agreed to pay $920 million in fines to U.S. and U.K. regulators for engaging in unsound and unsafe practices related to the $6 billion of losses it suffered from the London Whale trade. The bank, which is trying to sell its big physical commodities business because of political pressure, also plans on increasing litigation reserves by at least $1.5 billion in the fourth quarter of 2013.
“While we had strong underlying performance across the businesses, unfortunately, the quarter was marred by large legal expense. We continuously evaluate our legal reserves, but in this highly charged and unpredictable environment, with escalating demands and penalties from multiple government agencies, we thought it was prudent to significantly strengthen them,” said Jamie Dimon, JPMorgan Chase’s chief executive, in a statement. “While we expect our litigation costs should abate and normalize over time, they may continue to be volatile over the next several quarters.”
For JPMorgan Chase, the legal monster does not seem to be going away soon, but investors seem to think the worst might be behind the big bank. Shares of JPMorgan were set to open slightly higher on Friday
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