JP Morgan profits hit by multi-billion dollar fines and penalties

Posted on Jan 14 2014 - 11:30pm by IBC News

The cost of several multi-billion dollar settlements has led to a double-digit fall in full-year profits at JP Morgan Chase after the US bank was hit with a record series of fines.

Net income for 2013 fell 16pc year-on-year to $17.9bn (£10.9bn) after JP Morgan was forced to put aside $11.1bn in “legal expenses” to meet the cost of fines related to its involvement in the $50bn Madoff ponzi scheme and the sale of mortgage-backed debt to investors.

Reporting its fourth-quarter earnings, JP Morgan said it had taken an $800m charge in the last three months of last year against the cost of legal settlements, pushing down profits for the period by 7pc to $5.3bn.

Profits for the quarter were also hit by what the lender said was a $1.5bn “funding valuation adjustment” taken against its holdings of “derivatives and structured notes”.

Revenues for the full-year were broadly flat compared to 2012 at $96.6bn and staff costs also remained largely unchanged at $30.8bn, equivalent to an average pay package for each of the bank’s 251,196 employees of $122,653.

The highest paid staff were the 52,250 employees of JP Morgan’s corporate and investment bank who received an average salary and bonus worth $207,368.

JP Morgan results kick off the Wall Street reporting season and will be seen as a bellwether, not just for the US banks, but for European lenders with major investment banking business, such as Barclays, Deutsche Bank and UBS.

Bank of America will report its fourth-quarter results on Wednesday, followed by Citigroup and Goldman Sachs on Thursday, and Morgan Stanley on Friday.

Barclays will not report its full-year financial results until next month.

Jamie Dimon, chief executive of JP Morgan, said the bank had faced “significant issues” towards the end of the year, but that he was “pleased” they were now in the past.

“We reached several important resolutions – Global RMBS [residential mortgage-backed securities], Gibbs & Bruns [a separate mortgage-backed security legal claim], and Madoff. It was in the best interests of our company and shareholders for us to accept responsibility, resolve these issues and move forward,” said Mr Dimon.

As well as the mortgage and Madoff settlements, Mr Dimon has also faced pressure this year over the bank’s handling of the ‘London Whale’ scandal that led to fines last year of more than $900m after the lender admitted lost $6bn on a series of large trades taken by staff in its London-based chief investment office.

About the Author

Leave A Response