A wave of legal and regulatory woes wrecked JPMorgan’s third-quarter results, pushing the bank into something it managed to avoid throughout the financial crisis, a quarterly loss.
It is the first time under the tenure of Jamie Dimon, for whom the sobriquet “embattled” is beginning to become applicable, that the business has gone into the red.
The jumble of issues faced by the bank cost it $7.2bn (£4.5bn), more than enough to wipe out a $5.82bn profit without one offs, which was better than Wall Street’s forecasts.
The money, $9.15bn before taxes, includes provisions set aside against future claims. In total the bank disclosed it has set aside $23bn to cover fines, settlements and other legal expenses.
The most high-profile case on this side of the Atlantic affecting the bank came as a result of the multi-billion dollar losses racked up by one of its traders, known as the London Whale. Once dismissed by Mr Dimon as “a tempest in a teacup” the affair led to the bank having to pay $920m to watchdogs on both sides of the atlantic and some of its former traders are facing charges as a result.
But JPMorgan faces a string of other issues. Watchdogs are looking at the hiring of relatives of senior officials in China to see if they helped the bank win business and an internal inquiry is examining the employment of 200 people.
Another investigation relates to the sale of mortgage-backed securities while the bank could also find itself caught up in a wide-ranging investigation into the setting of various benchmark prices, which are being scrutinised by regulators around the world.
Some of the mortgage inquiries relate to two troubled banks acquired by JPMorgan during the financial crisis, lender Washington Mutual and investment bank Bear Stearns, under urgings from politicians and regulators.
Mr Dimon said the bank was seeking what he described as “a fair settlement” meaning “one that recognises the extraordinary circumstances of the Bear Stearns and Washington Mutual transactions, which were undertaken at the request or encouragement of the US government”.
He said of the provisions generally: “In this highly charged and unpredictable environment, with escalating demands and penalties from multiple government agencies, we thought it was prudent to strengthen them.”
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