Legal costs hold back Wall Street profits

Comment on this story


IOL br Jamie Dimonla

Bloomberg

JPMorgan Chase chief executive Jamie Dimon, whose company announced $23 billion in settlements of private and government legal disputes in the past year, says legal expenses at the lender will remain high. Photo: Bloomberg.

New York - Combined profit at the six largest US banks jumped last year to the highest level since 2006, analysts have forecast, even as the firms allocated more than $18 billion (R192bn) to deal with claims they broke laws or cheated investors.

A stock market rally, cost cuts and a decline in bad loans raised the group’s net income 21 percent year on year to $74.1bn, according to analyst estimates. That would be second only to 2006, when the firms reaped $84.6bn at the peak of the US housing bubble. The record would be topped were it not for litigation and other legal expenses.

Wall Street’s largest banks, due to report fourth-quarter earnings starting on Tuesday, are contending with fresh accusations they misled buyers of mortgage-backed securities, rigged markets or ignored suspicious activity by customers. JPMorgan Chase chief executive Jamie Dimon, whose firm announced more than $23bn in settlements of government and private suits in the past year, has said legal expenses at the bank would remain high.

Jason Goldberg, a Barclays analyst in New York, said: “Legal-related costs significantly impacted results in 2013, and we think they’ll stay elevated in the near term. Banks will try to get a lot done in year-end results to have less of a burden in 2014.”

JPMorgan and Wells Fargo, the first to post results, will show the impact US regulatory scrutiny is having on banks.

Analysts expect Wells Fargo to announce its biggest annual profit, surpassing JPMorgan’s for the first time since 2009. Net income at the fourth-largest US bank, which relies most on retail banking and mortgage lending, is forecast to rise 4.1 percent in the fourth quarter to $5.3bn. For the year, analysts estimate about $21bn, a fifth consecutive annual record.

JPMorgan will probably say profit slid 14 percent to $4.9bn, according to analysts. The firm’s annual profit may drop 21 percent to $16.9bn, snapping three consecutive years of records.

The bank agreed this week to pay $2.6bn to resolve criminal and civil allegations that it failed to stop Bernard Madoff’s Ponzi scheme, a deal JPMorgan said would cut fourth-quarter earnings by $850 million. In November, it reached a record $13bn settlement of probes into mortgage-bond sales. The firm also resolved inquiries last year into botched derivatives bets, energy market manipulation and credit monitoring products.

JPMorgan allocated $11.1bn to litigation and legal costs during the first nine months of last year, the most among the six lenders, according to quarterly reports banks filed with the Federal Reserve. Bank of America set aside $4.8bn and Citigroup $1.4bn.

The six banks’ combined litigation and legal expenses in the nine months rose 76 percent from a year earlier to $18.7bn, higher than any annual amount since at least 2008. The costs increased at all the firms except Wells Fargo, where they fell 1.2 percent to $413m, and Morgan Stanley, which reported a 14 percent decline to $211m.

“Even into 2014, legal could be a drag for the whole industry,” Pri de Silva at CreditSights said. “But it can’t be any worse than it was last year.”

Spokesmen for the six banks, which also include Goldman Sachs, declined to comment.

Settlements do not always hit a bank’s earnings in the same quarter. That is because firms set aside reserves as costs become probable, sometimes years before cases are resolved.

JPMorgan was not alone in settling government claims last year. Citigroup and Wells Fargo were among six firms that paid almost $3.9bn to resolve Federal Housing Finance Agency claims that they sold faulty mortgage bonds to Fannie Mae and Freddie Mac. Bank of America also agreed to an $11.7bn package designed to resolve most mortgage disputes with Fannie Mae.

Last year was the best for US financial stocks since 1997. The 24-company KBW banks index climbed 35 percent amid a broader rise in equities and an accelerating US economy. Revenue from equity trading probably jumped 33 percent from a year earlier, Matt O’Connor, a New York-based analyst at Deutsche Bank, wrote last month.

Annual earnings at Bank of America and Citigroup surged last year.

Bank of America, scheduled to announce results on Wednesday, boosted fourth-quarter profit more than fourfold to $3.3bn, according to the estimates. Net income for the year may amount to $11.2bn, the most since 2007. Bank of America’s earnings will have rebounded from a year ago, when profit in the fourth quarter fell to $732m because of mortgage-related settlements.

Citigroup, set to report a day later, is estimated to say profit more than doubled to $3.14bn in the quarter or $14.2bn for the year, the most since 2006. The firm booked costs tied to a mortgage settlement a year earlier.

Legal troubles were not the only drag on earnings for banks last year. A slump in fixed income trading probably cut revenue from that business by 10 percent, according to O’Connor at Deutsche Bank.

Goldman Sachs suffered the steepest decline at 23 percent, he estimated. The firm will say quarterly income fell 28 percent to $2.09bn in its results on Thursday, analysts estimate.

Morgan Stanley is set to report results a day later and analysts expect it to say that profit for the period rose 70 percent to $859m.

The reduction of monthly bond purchases by the Fed may continue to damp fixed-income trading. Rising interest rates linked to Fed actions also cut mortgage revenue last year as fewer homeowners refinanced bonds.

Banks were focusing on expenses they could control, Erika Najarian at Bank of America wrote last month.

The six big lenders reduced their workforce by 29 000, or 2.6 percent, in the first nine months of 2013. Many cuts targeted mortgage personnel.

Investors would focus more on executives’ forecasts for this year than last year’s numbers, said Richard Staite at Atlantic Equities in London. “We expect management comments during conference calls to generally remain upbeat with stronger economic growth, a steeper yield curve and stronger equity revenues all being supportive.” – Hugh Son from Bloomberg


sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.

     

Join us on

IOL-Social networks IOL-Social networks IOL-Social networks IOL-Social networks
Baabbygirl
I'm a 27 year old woman looking to meet men between the ages of 27 and 36.
View Profile
DDeeZA
I'm a 45 year old woman looking to meet women between the ages of 19 and 50.
View Profile
vicky74
I'm a 40 year old woman looking to meet men between the ages of 38 and 45.
View Profile
Rosey903
I'm a 40 year old woman looking to meet men between the ages of 38 and 45.
View Profile
Mistry_lady
I'm a 41 year old woman looking to meet men between the ages of 35 and 45.
View Profile
Shazzyyyy
I'm a 29 year old woman looking to meet men between the ages of 28 and 35.
View Profile
candy954
I'm a 31 year old woman looking to meet men between the ages of 45 and 70.
View Profile
fungi1971
I'm a 43 year old woman looking to meet men between the ages of 40 and 50.
View Profile
Bathandwa83
I'm a 31 year old woman looking to meet men between the ages of 31 and 47.
View Profile
spesy59
I'm a 35 year old woman looking to meet men between the ages of 32 and 40.
View Profile
ranga322
I'm a 32 year old woman looking to meet men between the ages of 31 and 40.
View Profile
MissD123
I'm a 39 year old woman looking to meet men between the ages of 36 and 47.
View Profile
mako_001
I'm a 35 year old woman looking to meet men between the ages of 35 and 70.
View Profile
hellena_596
I'm a 37 year old woman looking to meet men between the ages of 37 and 45.
View Profile
gloml66
I'm a 48 year old woman looking to meet men between the ages of 40 and 58.
View Profile
danda100
I'm a 47 year old woman looking to meet men between the ages of 37 and 52.
View Profile
fiksBee
I'm a 25 year old woman looking to meet men between the ages of 26 and 40.
View Profile
CYAGal
I'm a 28 year old woman looking to meet men between the ages of 35 and 50.
View Profile
Noxy727
I'm a 27 year old woman looking to meet men between the ages of 30 and 36.
View Profile
Dlodlolas75
I'm a 39 year old woman looking to meet men between the ages of 43 and 49.
View Profile
Curvz
I'm a 41 year old woman looking to meet men between the ages of 38 and 45.
View Profile
kauwel
I'm a 40 year old woman looking to meet men between the ages of 39 and 55.
View Profile
Emjae
I'm a 38 year old woman looking to meet men between the ages of 35 and 45.
View Profile
Noks76
I'm a 38 year old woman looking to meet men between the ages of 37 and 45.
View Profile
Foxy88
I'm a 22 year old woman looking to meet men between the ages of 25 and 33.
View Profile
LolliCandy
I'm a 20 year old woman looking to meet men between the ages of 21 and 35.
View Profile
Resa1995
I'm a 48 year old woman looking to meet men between the ages of 45 and 70.
View Profile
zama1zn
I'm a 37 year old woman looking to meet men between the ages of 38 and 47.
View Profile
briluu
I'm a 24 year old woman looking to meet men between the ages of 27 and 37.
View Profile
Beautyful_gal
I'm a 32 year old woman looking to meet men between the ages of 35 and 50.
View Profile
BOTSHELOMAN
I'm a 32 year old woman looking to meet men between the ages of 35 and 42.
View Profile
Nola_505
I'm a 40 year old woman looking to meet men between the ages of 35 and 47.
View Profile
MASESHIA
I'm a 28 year old woman looking to meet men between the ages of 27 and 40.
View Profile
lulubaby
I'm a 33 year old woman looking to meet men between the ages of 30 and 70.
View Profile
smilyz
I'm a 43 year old woman looking to meet men between the ages of 35 and 48.
View Profile
mitch09
I'm a 29 year old woman looking to meet men between the ages of 35 and 40.
View Profile
Leratomntande
I'm a 23 year old woman looking to meet men between the ages of 25 and 30.
View Profile
LavishT
I'm a 21 year old woman looking to meet men and women between the ages of 25 and 27.
View Profile
Thel_89_zzz
I'm a 25 year old woman looking to meet men between the ages of 30 and 45.
View Profile
hlehle888
I'm a 41 year old woman looking to meet men between the ages of 45 and 50.
View Profile
mcgoyer
I'm a 26 year old woman looking to meet men between the ages of 27 and 35.
View Profile
Garnet3107
I'm a 44 year old woman looking to meet men between the ages of 35 and 45.
View Profile
ntando_784
I'm a 34 year old woman looking to meet men between the ages of 40 and 50.
View Profile
Voicelady
I'm a 40 year old woman looking to meet men between the ages of 35 and 50.
View Profile
samke_722
I'm a 22 year old woman looking to meet men between the ages of 22 and 25.
View Profile
RareT0paz
I'm a 35 year old woman looking to meet men between the ages of 38 and 60.
View Profile
sweetnessmgm
I'm a 26 year old woman looking to meet men between the ages of 40 and 63.
View Profile
Royalness
I'm a 29 year old woman looking to meet men between the ages of 30 and 45.
View Profile
kgotlas
I'm a 34 year old woman looking to meet men between the ages of 30 and 45.
View Profile
curvalicious
I'm a 30 year old woman looking to meet men between the ages of 25 and 45.
View Profile
TT200
I'm a 25 year old woman looking to meet men between the ages of 25 and 35.
View Profile
Mag137
I'm a 60 year old woman looking to meet men between the ages of 57 and 67.
View Profile
vengodess
I'm a 27 year old woman looking to meet men and women between the ages of 25 and 100.
View Profile
kncyLuv
I'm a 28 year old woman looking to meet men between the ages of 27 and 45.
View Profile
Yahoo
I'm a 42 year old woman looking to meet men between the ages of 41 and 60.
View Profile
sbobo736
I'm a 27 year old woman looking to meet men between the ages of 25 and 45.
View Profile
mello_185
I'm a 26 year old woman looking to meet men between the ages of 25 and 60.
View Profile
nwaolisa
I'm a 31 year old woman looking to meet men between the ages of 32 and 41.
View Profile
marryme2014
I'm a 34 year old woman looking to meet men between the ages of 37 and 45.
View Profile
ChocLatte
I'm a 44 year old woman looking to meet men between the ages of 40 and 60.
View Profile
kafze
I'm a 29 year old woman looking to meet men between the ages of 29 and 45.
View Profile
honeybee_036
I'm a 25 year old woman looking to meet men between the ages of 25 and 50.
View Profile
FanceFace
I'm a 27 year old woman looking to meet men between the ages of 28 and 45.
View Profile
ME_JE
I'm a 43 year old woman looking to meet men between the ages of 35 and 50.
View Profile
simphy337
I'm a 30 year old woman looking to meet men between the ages of 35 and 45.
View Profile
Dudutuli246
I'm a 34 year old woman looking to meet men between the ages of 35 and 50.
View Profile
Sweetlipsss627
I'm a 21 year old woman looking to meet men between the ages of 25 and 50.
View Profile
Blaq_chic
I'm a 26 year old woman looking to meet men between the ages of 25 and 45.
View Profile
ProVoq
I'm a 43 year old woman looking to meet men between the ages of 50 and 70.
View Profile
tkay011
I'm a 23 year old woman looking to meet women between the ages of 25 and 45.
View Profile
joocypie
I'm a 28 year old woman looking to meet men between the ages of 27 and 45.
View Profile
Sthandwasakhesit
I'm a 29 year old woman looking to meet men between the ages of 30 and 35.
View Profile
Funfoodie3012
I'm a 49 year old woman looking to meet men between the ages of 45 and 55.
View Profile
SexLips
I'm a 26 year old woman looking to meet men between the ages of 25 and 45.
View Profile
Bonwel
I'm a 30 year old woman looking to meet men between the ages of 32 and 36.
View Profile
PrincessEdelweiss
I'm a 43 year old woman looking to meet men between the ages of 35 and 50.
View Profile
leez83
I'm a 31 year old woman looking to meet men between the ages of 25 and 42.
View Profile
lala408
I'm a 46 year old woman looking to meet men between the ages of 40 and 55.
View Profile
Casiopiea40
I'm a 44 year old woman looking to meet men between the ages of 35 and 50.
View Profile
Rivee
I'm a 24 year old woman looking to meet men between the ages of 26 and 32.
View Profile
Calmine
I'm a 24 year old woman looking to meet men between the ages of 25 and 40.
View Profile
Leematt
I'm a 25 year old woman looking to meet men between the ages of 25 and 29.
View Profile
lexy278
I'm a 32 year old woman looking to meet men between the ages of 30 and 40.
View Profile
Melone
I'm a 27 year old woman looking to meet men between the ages of 30 and 42.
View Profile
sassyfoxylady101
I'm a 33 year old woman looking to meet men between the ages of 25 and 45.
View Profile
xoxohayleyxoxo
I'm a 26 year old woman looking to meet men between the ages of 18 and 100.
View Profile
MeltChocolate
I'm a 35 year old woman looking to meet men between the ages of 40 and 50.
View Profile
armor2014
I'm a 55 year old woman looking to meet men between the ages of 45 and 70.
View Profile
TABIEE
I'm a 29 year old woman looking to meet men between the ages of 40 and 100.
View Profile
RealBlackPearl
I'm a 22 year old woman looking to meet men between the ages of 25 and 35.
View Profile
kiara_111
I'm a 24 year old woman looking to meet men between the ages of 26 and 35.
View Profile
Zama101
I'm a 29 year old woman looking to meet men between the ages of 29 and 100.
View Profile
LadyJimpster
I'm a 23 year old woman looking to meet men between the ages of 22 and 28.
View Profile
Smashizo
I'm a 29 year old woman looking to meet men between the ages of 32 and 37.
View Profile
maria8022
I'm a 34 year old woman looking to meet men between the ages of 40 and 60.
View Profile
ally_charmy80
I'm a 34 year old woman looking to meet men between the ages of 40 and 55.
View Profile
blosoble
I'm a 27 year old woman looking to meet men between the ages of 28 and 40.
View Profile
pumpania
I'm a 27 year old woman looking to meet men between the ages of 28 and 40.
View Profile
Roroe
I'm a 26 year old woman looking to meet men and women between the ages of 22 and 30.
View Profile
Cyndilouper
I'm a 35 year old woman looking to meet men between the ages of 30 and 45.
View Profile
TSKgosiemang
I'm a 52 year old man looking to meet women between the ages of 35 and 50.
View Profile
Deejay_homy
I'm a 46 year old man looking to meet women between the ages of 18 and 42.
View Profile
Minkh
I'm a 30 year old man looking to meet women between the ages of 18 and 29.
View Profile
jakobus
I'm a 34 year old man looking to meet women between the ages of 18 and 100.
View Profile
Deathrow5662
I'm a 39 year old man looking to meet women between the ages of 25 and 35.
View Profile
2282B
I'm a 48 year old man looking to meet women between the ages of 26 and 37.
View Profile
GastFR
I'm a 39 year old man looking to meet women between the ages of 25 and 39.
View Profile
Clownstotheleftofme
I'm a 45 year old man looking to meet women between the ages of 32 and 41.
View Profile
Jabz_0
I'm a 29 year old man looking to meet women between the ages of 25 and 36.
View Profile
Dayo78
I'm a 36 year old man looking to meet women between the ages of 20 and 50.
View Profile
dev_xoxox52
I'm a 53 year old man looking to meet women between the ages of 41 and 65.
View Profile
Mpeks
I'm a 22 year old man looking to meet women between the ages of 18 and 30.
View Profile
Diva1308
I'm a 43 year old man looking to meet women between the ages of 18 and 100.
View Profile
bobbylava
I'm a 35 year old man looking to meet women between the ages of 18 and 31.
View Profile
Vbe2014
I'm a 37 year old man looking to meet women between the ages of 25 and 30.
View Profile
princepoqo
I'm a 29 year old man looking to meet women between the ages of 18 and 45.
View Profile
sbo123sss
I'm a 30 year old man looking to meet women between the ages of 25 and 45.
View Profile
Ernie_Manyesa
I'm a 32 year old man looking to meet women between the ages of 20 and 45.
View Profile
Smooth_Kriminal
I'm a 27 year old man looking to meet men between the ages of 25 and 45.
View Profile
bigbhele
I'm a 34 year old man looking to meet women between the ages of 18 and 55.
View Profile
mixido2
I'm a 39 year old man looking to meet women between the ages of 18 and 35.
View Profile
loner729
I'm a 40 year old man looking to meet women between the ages of 25 and 45.
View Profile
Lucky123nxt
I'm a 36 year old man looking to meet women between the ages of 18 and 40.
View Profile
Eriqnes
I'm a 33 year old man looking to meet women between the ages of 21 and 35.
View Profile
mattgeah
I'm a 31 year old man looking to meet women between the ages of 25 and 40.
View Profile
Jono693
I'm a 42 year old man looking to meet women between the ages of 25 and 45.
View Profile
Oupa0414
I'm a 29 year old man looking to meet women between the ages of 25 and 33.
View Profile
PoundzMm
I'm a 23 year old man looking to meet women between the ages of 23 and 30.
View Profile
Washe
I'm a 37 year old man looking to meet women between the ages of 25 and 33.
View Profile
Mahlobo
I'm a 46 year old man looking to meet women between the ages of 28 and 45.
View Profile
Sabloma
I'm a 45 year old man looking to meet women between the ages of 20 and 35.
View Profile
TuEsDAy
I'm a 52 year old man looking to meet women between the ages of 35 and 55.
View Profile
tsvoritsvoto
I'm a 27 year old man looking to meet women between the ages of 18 and 25.
View Profile
Henry071
I'm a 28 year old man looking to meet women between the ages of 25 and 35.
View Profile
myth909
I'm a 34 year old man looking to meet women between the ages of 25 and 45.
View Profile
tripplekkkk
I'm a 37 year old man looking to meet women between the ages of 18 and 30.
View Profile
Satisfactor99
I'm a 37 year old man looking to meet women between the ages of 18 and 35.
View Profile
STONE_228
I'm a 42 year old man looking to meet women between the ages of 18 and 35.
View Profile
Siyabulela90
I'm a 24 year old man looking to meet men between the ages of 25 and 45.
View Profile
Seriousaboutlife325
I'm a 38 year old man looking to meet women between the ages of 18 and 100.
View Profile
Kelvin7777
I'm a 50 year old man looking to meet women between the ages of 42 and 56.
View Profile
kpl23
I'm a 35 year old man looking to meet women between the ages of 26 and 34.
View Profile
Gemini24
I'm a 45 year old man looking to meet women between the ages of 30 and 45.
View Profile
Siwithpie
I'm a 44 year old man looking to meet women between the ages of 23 and 45.
View Profile
shiva709
I'm a 56 year old man looking to meet women between the ages of 45 and 56.
View Profile
LIONKING915
I'm a 59 year old man looking to meet women between the ages of 38 and 50.
View Profile
Lawrence218
I'm a 26 year old man looking to meet women between the ages of 25 and 39.
View Profile
shooter_949
I'm a 51 year old man looking to meet women between the ages of 20 and 50.
View Profile
dlalo
I'm a 44 year old man looking to meet women between the ages of 18 and 100.
View Profile
catcher182
I'm a 22 year old man looking to meet men between the ages of 20 and 24.
View Profile
GD1
I'm a 70 year old man looking to meet women between the ages of 55 and 65.
View Profile
mesut909
I'm a 45 year old man looking to meet women between the ages of 25 and 55.
View Profile
Thamza_77
I'm a 37 year old man looking to meet women between the ages of 18 and 35.
View Profile
Ma1010n
I'm a 26 year old man looking to meet women between the ages of 25 and 45.
View Profile
Jb24golf
I'm a 40 year old man looking to meet women between the ages of 32 and 38.
View Profile
Chacal
I'm a 44 year old man looking to meet women between the ages of 30 and 40.
View Profile
Thulani1234
I'm a 42 year old man looking to meet women between the ages of 27 and 45.
View Profile
michaelangelo
I'm a 27 year old man looking to meet women between the ages of 18 and 25.
View Profile
bloodmoney370
I'm a 43 year old man looking to meet women between the ages of 30 and 50.
View Profile
Qtip
I'm a 30 year old man looking to meet women between the ages of 26 and 32.
View Profile
gario
I'm a 54 year old man looking to meet women between the ages of 18 and 50.
View Profile
charged
I'm a 40 year old man looking to meet women between the ages of 25 and 35.
View Profile
JonnyBee
I'm a 26 year old man looking to meet women between the ages of 19 and 28.
View Profile
Mxo87
I'm a 27 year old man looking to meet women between the ages of 18 and 30.
View Profile
SPG
I'm a 49 year old man looking to meet women between the ages of 18 and 50.
View Profile
chumisto
I'm a 34 year old man looking to meet women between the ages of 18 and 100.
View Profile
lookingforfunza
I'm a 36 year old man looking to meet women between the ages of 20 and 40.
View Profile
Moxion
I'm a 27 year old man looking to meet women between the ages of 18 and 35.
View Profile
Shadra143
I'm a 22 year old man looking to meet women between the ages of 18 and 45.
View Profile
ngla35
I'm a 38 year old man looking to meet women between the ages of 18 and 100.
View Profile
gothicD
I'm a 44 year old man looking to meet women between the ages of 18 and 37.
View Profile
Mokoka01
I'm a 42 year old man looking to meet women between the ages of 28 and 35.
View Profile
tonym
I'm a 44 year old man looking to meet women between the ages of 24 and 35.
View Profile
GWL321
I'm a 58 year old man looking to meet women between the ages of 46 and 56.
View Profile
mfhalim
I'm a 42 year old man looking to meet women between the ages of 18 and 35.
View Profile
hawk619
I'm a 44 year old man looking to meet women between the ages of 35 and 45.
View Profile
bangstar
I'm a 22 year old man looking to meet women between the ages of 19 and 23.
View Profile
Bento1
I'm a 52 year old man looking to meet women between the ages of 38 and 50.
View Profile
IceTy
I'm a 42 year old man looking to meet women between the ages of 18 and 42.
View Profile
mcD
I'm a 39 year old man looking to meet women between the ages of 25 and 40.
View Profile
Terror000
I'm a 28 year old man looking to meet women between the ages of 25 and 45.
View Profile
Fanzonator
I'm a 28 year old man looking to meet women between the ages of 25 and 45.
View Profile
sweetman465
I'm a 67 year old man looking to meet women between the ages of 48 and 62.
View Profile
Rendzo
I'm a 47 year old man looking to meet women between the ages of 25 and 45.
View Profile
THOKZANHLA
I'm a 44 year old man looking to meet women between the ages of 25 and 44.
View Profile
CoolnCalm
I'm a 35 year old man looking to meet women between the ages of 25 and 45.
View Profile

Business Directory