JPMorgan reported a net loss of $380 million, or 17 cents per share, after setting aside an additional $9.2 billion for future litigation expenses. The $9.2 billion is part of a $23 billion pot the bank has set aside to cover mounting legal costs.
A portion of that money will go to U.S. and British authorities. JPMorgan agreed in September to pay $920 million to resolve inquiries into its handling of the disastrous “London Whale” trading losses. An additional $389 million has been earmarked to settle regulatory investigations into the bank’s credit card practices.
The bank is also entangled in protracted negotiations with the Justice Department to dispose of multiple government investigations into its sale of shoddy mortgage-backed securities in the lead-up to the financial crisis.
Dimon traveled to Washington last month for a rare face-to-face negotiation with Attorney General Eric H. Holder Jr., but talks have stalled because of the government shutdown. People familiar with the negotiations said any deal would involve JPMorgan paying at least $11 billion, the biggest settlement for a single company.
The usually unabashed Dimon, 57, has remained contrite, humbled by a series of bad turns. Yet he is far from sheepish and continues to insist that the country’s biggest bank is still its best-run bank.
“This company is very sound, with plenty of capital,” Dimon told analysts on an earnings call.
Dimon also said on the call that the bank wants “a reasonable settlement” with the Justice Department but told analysts that it “involves multiple agencies, so you can imagine the complexity.”
Even if that whopping agreement is reached, JPMorgan will still be cleaning up regulatory messes. There are ongoing federal probes into the bank’s debt-
collection practices and its role in the manipulation of a key interest-rate benchmark, among other matters.
Dimon said litigation expenses “will probably be elevated the next year or two.” He added: “We just have to deal with it and deal with the reality as it is. It will abate over time, and the underlying power of the company you can see.”
At several points during the earnings call, Dimon mentioned how “painful” the legal fallout has been for the company.
The quarterly loss is noteworthy
given that JPMorgan emerged from the financial crisis relatively unscathed, while its competitors struggled under the weight of troubled loans. Dimon was cast as the sage of Wall Street, a reputable voice for an industry tarnished by the sins of the crisis.
Dimon often criticized regulators and the Obama administration, which may have made
JPMorgan a target, analysts said. Some say the government is going after the nation’s largest bank to further a larger agenda of breaking up all big banks.