Billions of dollars in legal costs from a string of government settlements drove fourth-quarter profits down 7 percent at JPMorgan Chase, capping off a tumultuous year for the nation’s biggest bank.
On Tuesday, JPMorgan reported net income of $5.28 billion, or $1.30 per share, for the last three months of 2013, compared with $5.69 billion for the same period a year earlier. Revenue for the quarter came in at $24 billion, 1 percent above the year-ago period.
Earnings at JPMorgan reflect a year rife with legal battles that culminated in the bank paying the government $13 billion to resolve allegations that it sold faulty mortgage securities. Ending government investigations has cost the bank about $20 billion in the past 12 months.
JPMorgan’s quarterly results included a charge of 27 cents per share tied to legal costs, including the settlement with federal authorities over its involvement in Bernard Madoff’s Ponzi scheme. The bank agreed last week to pay more than $2 billion to resolve criminal charges that it failed to alert the government to fraudulent activities of its longtime client.
The bank took steps in the third quarter to brace for litigation expenses by squirreling away $9.2 billion, a move that led to its first quarterly loss under Chief Executive Officer Jamie Dimon. It has also spent roughly $1 billion to improve internal controls that were at the heart of many government investigations, including the Madoff investigation.
“We are pleased to have made progress on our control, regulatory and litigation agendas and to have put some significant issues behind us this quarter,” Dimon said in a statement Tuesday. “It was in the best interests of our company and shareholders for us to accept responsibility, resolve these issues and move forward.”
Despite the drag on JPMorgan’s profits, there were some bright spots in its earnings. Credit-card sales volume rang in at $112.6 billion, up 11 percent from the previous year. Auto loan origination climbed 16 percent from the year before to $6.4 billion as car sales continue to boom.
Asset management shined, with a 12 percent increase to $2.3 trillion in client assets. But the investment banking business was battered by lackluster demand. Investment banking profits tumbled 57 percent on lower fee revenue.
Mortgage originations also fell - by 54 percent to $23.3 billion - as fewer borrowers seek to refinance their home loans and rising interest rates scare off would-be buyers.
On Tuesday, Wells Fargo, the nation’s largest home-loan lender, reported a 37.5 percent decline in origination volume. Both banks said mortgage applications fell more than 20 percent during the fourth quarter.
Yet profits on home loans at JPMorgan were up 34 percent because of fewer losses on troubled loans and lower expenses. JPMorgan, like its competitors, has cut thousands of workers in its mortgage-lending business amid dwindling demand.
Shares of JPMorgan rose 4 cents to close Tuesday at $57.74.
Business, Pages 25 on 01/15/2014