The largest U.S. bank, based on assets, recorded a loss during the third quarter. JPMorgan Chase & Co. blamed the loss on having more expenses for lawsuits and government investigations.
The bank posted a $380 million loss, which totaled 17 cents per share. The net income a year earlier was $5.71 billion, or $1.40 per share, for the same period a year earlier. Experts have pointed out it is extremely rare for the big bank to report a loss.
This loss is reported after government probes continue to haunt the largest bank in the nation. The end result was revenue falling to $23.9 billion, or about 8%. The bank reported a strong profit growth in consumer lending, management, and investment lending. Having booked $9.2 billion in legal costs, the bank would have reported a quarterly net income of $5.8 billion, which broken down equals $1.42 per share. Without the legal expenses, the figures would have beaten the predictions of Wall Street analysts who were polled by Thomson Reuters.
Chairman and Chief Executive Jamie Dimon said that the financial performance was negatively impacted by legal expenses that were required because of all of the government investigations and lawsuits regarding lending practices.
“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,” Dimon said 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.”
The bank was entangled in the “London Whale” situation, which involved wrong-way derivatives that ended up costing the bank more than $6 billion. The event damaged the bank’s reputation on Wall Street, where it had been considered one of Wall Street’s best managed institutions. In addition, the bank also got ownership of two troubled financial institutions, Washington Mutual and Bear Stearns, both of which had toxic mortgage investments.
Dimon’s statement also pointed toward some of JPMorgan’s legal woes stemming from those acquisitions. The bank has been in talks to work toward settling claims made by a host of federal and state agencies, paying out as much as $11 billion.
“The board continues to seek a fair and reasonable settlement with the government on mortgage-related issues — and one that recognizes the extraordinary circumstances of the Bear Stearns and Washington Mutual transactions, which were undertaken at the request or encouragement of the U.S. government,” Dimon said.
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