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Financial giant JPMorgan Chase reported losses this quarter because of high legal costs. This was unexpected, as JPMorgan’s core business has produced positive results and strong profits this quarter. The country’s largest bank by assets made $23.12 billion in revenues this quarter, yet reported to investors a $380 million dollar loss. This reportedly was “due to a $9.15 billion dollar charge for legal expenses following a series of high-profile regulatory problems,” according to Yahoo.com.
When the earnings are adjusted for extraordinary items, earnings divided by the number of issued shares leaves $1.42 cents per share, which still remains 21 cents more than the street expected. In otherwords, adjusting for this particular once off type of loss, the company is doing very well, and has beat market expectations. CEO Jamie Dimon commented, “The results demonstrated strong underlying performance across the businesses, but that the company’s overall results were marred by large legal expenses.”
Jamie Dimon continues to assure his large client base. He says that while oversight on the size and strength of the bank’s legal support team is constant, relative to the “escalating demands and penalties from multiple government agencies” his decision was practical in its assessment to have a stronger legal support base. The CEO finalizes by saying how he doesn’t always expect the company’s legal costs to be this high, or even to remain this high, yet for the moment he expects volatility there, although over time he expects JPMorgan’s legal costs to “abate and normalize over time.”
JPMorgan resolved a $920 million settlement regarding the “London Whale” fiasco, where a London portfolio manager was overexposed, over-leveraged and lost $6.2 billion as the credit derivatives held lost value. Other penalties incurred by the bank happened in July as JPMorgan agreed to resolve electricity market-manipulation charges with a $410 million dollar settlement.
Federal regulators continue in their oversight process as they probe and audit data from these cases. Currently the financial giant is in discussion with the DOJ over a possible settlement regarding the mortgage-backed securities that were sold before the housing market crash. That specific settlement could be at $11 billion or more.
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In spite of these legal issues that the investment firm is facing, its quarterly report on Friday showed that compared to last year, the firm made a profit of $5.71 billion on revenues of $25.15 billion. Investors and analysts are still bullish on the firm, noting its track record and performance in recent times.
Image Credit: Business Week
