New York - A decade after Sanford “Sandy” Weill stepped down as Citigroup’s chief executive amid a cascade of regulatory investigations and lawsuits, JPMorgan Chase chief executive Jamie Dimon’s legal expenses are surpassing those of his one-time mentor.
Facing probes into mortgage bonds, energy trading and hiring practices in Asia, JPMorgan took a $7.2 billion (R71bn) charge last Friday for expenses tied to regulatory matters and litigation, bringing the total the bank has set aside or spent since the start of 2010 to $28bn. Weill’s tenure at Citigroup ended up leaving the bank with at least $5.5bn in legal costs, then the most in history for a Wall Street firm.
Dimon’s reputation, burnished by more than $100bn in profits and the rescue of failing lenders Bear Stearns and Washington Mutual, has endured a $6.2bn trading loss and accusations that the firm manipulated US power markets.
Until his departure, Weill’s image seemed immune to scandal, says Peter Henning, a law professor at Wayne State University in Detroit. “Weill was the great architect who revived the American banking system and made it a global leader,” he said. “Then all of a sudden, it changes.”
The jump in legal expenses forced Dimon last week to report the bank’s only quarterly loss on his watch. The third-quarter deficit amounted to $380 million, compared with a profit of $5.71bn a year earlier. The last time JPMorgan failed to report a profit was the second quarter of 2004, when William Harrison was chief.
Dimon still has the support of board members such as Laban Jackson, 71, the audit committee chairman who moved to JPMorgan with him when it combined with Bank One in 2004. Dimon is “the best manager I’ve seen, and I’m old.”
Under Dimon, JPMorgan has overtaken Citigroup as the top corporate bond underwriter and Goldman Sachs as the biggest bank in debt-trading revenue. The company set profit records in each of the past three years.
Among the six biggest US banks, only Wells Fargo exceeded the stock’s 40 percent total return, which includes price gains and reinvested dividends, since October 12, 2010.
JPMorgan fell 1c to $52.51 on Friday, after the disclosure. The stock has climbed 19 percent this year. Shareholders might give Dimon a pass as long as JPMorgan kept churning out cash, said Henning.
“The market’s probably looking at this going: ‘Once JPMorgan puts this behind it, it will go back to being a money machine.’ Weill got a free pass for a long time.” – Bloomberg