JPMorgan Chase reported a 7.3 percent slump in fourth-quarter earnings on Tuesday, as billions of dollars in legal costs from a series of government settlements continued to dampen profits at the nation’s largest bank.
The net earnings of $5.28 billion, or $1.30 a share, fell slightly below Wall Street analysts’ expectations of $1.35 a share.
“We are pleased to have made progress on our control, regulatory and litigation agendas and to have put some significant issues behind us this quarter,†said Jamie Dimon, the bank’s chief executive. Referring to a number of recent settlements, he added, “It was in the best interests of our company and shareholders for us to accept responsibility, resolve these issues and move forward.â€
The earnings on Tuesday underscored how expensive it has been for the bank to obtain peace with Washington. All told, JPMorgan has paid roughly $20 billion over the last 12 months to resolve government investigations.
The latest steep payout for the bank came last week when JPMorgan reached a $2 billion settlement with federal authorities who accused the bank of ignoring warning signs of Bernard L. Madoff’s Ponzi scheme. And in November, the Justice Department and other authorities extracted a record $13 billion settlement from JPMorgan over the bank’s sale of questionable mortgage securities in the run-up to the financial crisis.
Bracing for the large payouts, JPMorgan already set aside a $9.2 billion in the third quarter, a move that led the bank to report its first quarterly loss ever under Mr. Dimon.
As the nation’s largest bank, JPMorgan is considered something of a bellwether for the banking industry. And like JPMorgan, rival banks are also grappling with federal authorities who are scrutinizing the banks over their role in the mortgage boom and bust.
Despite JPMorgan’s dampened earnings, some analysts struck an optimistic tone, noting that the deals, however pricey, will finally allow JPMorgan and its top executives to focus on growing their businesses.
But even as JPMorgan whittles down its regulatory issues, the threats are far from over. Authorities have opened a bribery investigation into JPMorgan’s hiring practices in China. Cooperating with the investigations, JPMorgan has already turned over reams of internal emails and documents related to its “Sons and Daughters†hiring program, which employed the children of the booming nation’s ruling elite.
Adding to the challenges, JPMorgan, like its Wall Street peers is grappling with sluggish demand for loans. Particularly bruising is the sharp decline in mortgage refinancing â€"once a bright spot for banks in recent yearsâ€"as rising interest rates deter homeowners’ appetites.
