New York - JPMorgan Chase’s profit fell 7.3 percent in the fourth quarter of last year after legal costs, including $2.6 billion (R28bn) in settlements linked to Bernard Madoff’s Ponzi scheme, ended a three-year streak of record annual earnings, the lender said yesterday.
The biggest US bank said net income declined to $5.28bn from $5.69bn a year earlier. Earnings a share excluding the Madoff settlement and other one-time items were $1.40. A survey of 22 analysts had estimated $1.37 on average.
Chief executive Jamie Dimon is whittling down the firm’s list of legal woes that include allegations it misled buyers of mortgage bonds, rigged markets and turned a blind eye to suspicious activity by customers.
The Madoff agreement, which the bank said last week had cut fourth-quarter profit by about $850 million, capped a year in which the banking group spent more than $23bn on legal settlements.
“These costs were far higher than anyone anticipated, but they’ve made tremendous progress putting things behind them,” said Pri de Silva, a senior banking analyst at CreditSights in New York. “Things should look better from here.”
Shares of the company rose 33 percent last year, compared with the 35 percent gain of the 24-company KBW Bank index, the benchmark’s best annual performance since 1997.
JPMorgan avoided prosecution in the Madoff case by acknowledging that it ignored red flags for about 15 years that Madoff used his account to fund his fraud, Manhattan US attorney Preet Bharara said. Madoff is serving a 150-year federal prison sentence.
Still to be resolved are inquiries into whether the bank’s hiring practices in Asia violated anti-bribery laws, as well as possible manipulation of interest rates and currency benchmarks. The banking group is also being probed over mortgage-bond trades after the financial crisis.
“What you want to hear is that they’re resolving these issues, and that by the end of 2014 they get to a place where we’re talking about business operations and not the resolution of litigation or regulatory issues,” said Marty Mosby, a bank analyst with Guggenheim Securities.
Dimon said last month that he was motivated to settle the remaining cases, even if doing so meant paying a premium over fighting claims in court.
JPMorgan, which has said it was severing ties with foreign banks and individuals to tighten anti-money laundering controls, said last week it was weighing options including a sale of its prepaid-card business. – Bloomberg