JP Morgan falls to loss on huge litigation bills

Tim Wallace
Follow Tim
JP MORGAN made a loss in the last three months after crushing fines and bills to settle legal claims, the investment bank said yesterday.

Legal bills came to $9.2bn (£5.6bn) in its corporate arm, causing the bank to lose $380m in the third quarter of its financial year, down from a profit of $5.7bn in the same period of 2012.

The bank’s legal woes include last week’s agreement to pay $2.6bn to settle government and private suits over its involvement in the Madoff scandal.

Revenues fell eight per cent to $23.1bn in the three-month period. Consumer and community banking revenues tumbled 13 per cent on the year to $11.1bn, in part due to falling mortgage fees.

However, the business unit still saw profits rise 15 per cent to $2.7bn as its provisions for credit losses fell.

Revenues also fell two per cent in corporate and investment banking to $8.2bn. Markets and investor services revenue fell four per cent to $5.3bn and fixed income markets revenues dipped eight per cent to $3.4bn.

Other areas recorded growth – equities revenues jumped 20 per cent to $1.2bn.

The bank’s return on equity fell to minus one per cent in the quarter, from 12 per cent a year earlier.

It cut some costs by reducing headcount by 4,103 to 255,041 staff, and reduced compensation.

The bank’s shares fell by 1.4 per cent on the day.


■ JP Morgan made a loss of $380m in the third quarter of its financial year.

■ It would have made a profit if not for legal bills and provisions which combined to cost $9.2bn.

■ The bank said its underlying profits, stripping out those legal bills, came to $5.8bn for the quarter.

■ The loss had an impact on pay as the bank cut its costs a little.

■ The average employee at the bank earned $287,200, down from $289,500 a year earlier.

■ It also cut headcount by more than 4,000 and now employs a total of 255,041 staff.

■ Those changes helped bring down overall compensation payments by two per cent to $7.3bn.

■ As a result the bank’s compensation ratio now stands at 27 per cent, down from 32 per cent a year ago.

■ JP Morgan’s return on equity plunged to minus one per cent in the quarter from 12 per cent a year ago.

■ For the year so far its return on equity stands at eight per cent, down from 11 per cent in the same period of 2012.

■ The bank estimates its Basel I tier one common capital ratio at 10.5 per cent, up from 10.4 per cent a year ago. On a Basel III basis it estimates 9.5 per cent.