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JPMorgan profit falls 6.6% as legal costs rise
[NEW YORK] JPMorgan Chase & Co, the biggest US bank by assets, reported a 6.6 per cent drop in quarterly profit as legal costs exceeded US$1 billion in the wake of government probes into alleged wrongdoing and revenue from fixed-income trading fell.
The bank agreed in November to pay US$1 billion in penalties over its conduct in foreign exchange markets. Investigations into that and other areas of the bank's business are continuing.
However, while legal expenses rose to US$1.1 billion in the fourth quarter, from US$847 million in the same quarter last year, total legal costs of US$2.9 billion for the year were far less than the US$11.1 billion recorded in 2013.
Profit last year was hit by government penalties for failing to report suspicions of fraud by Ponzi-schemer Bernie Madoff.
Revenue from fixed-income trading fell 23 per cent to US$2.5 billion. Taking into account the sale of the bank's physical commodities business and accounting changes, revenue fell 14 per cent.
Net income fell to US$4.93 billion, or US$1.19 per share, from US$5.28 billion, or US$1.30 per share a year earlier. Revenue on a managed basis fell 2.3 per cent to US$23.55 billion.
Analysts on average had expected earnings of US$1.31 per share on revenue of US$23.64 billion, according to Thomson Reuters I/B/E/S. The results for both periods included special items.
The bank's shares were down 1.6 per cent before the bell.
Revenue from home loans fell by US$405 million to US$1.9 billion while investment banking fees rose 8 per cent to US$1.8 billion, driven by record debt underwriting fees of US$1.1 billion.
JPMorgan, the first big US bank to report quarterly results, said it paid its investment bank employees 27 per cent of revenue in 2014, down from 33 per cent in 2013, in a record year for both IPOs and mergers and acquisitions.
Apart from litigation costs, big US banks have been constrained by a long period of historically low interest rates.
Like other banks, JPMorgan has also been investing heavily to improve risk controls and system security and to comply with stricter capital rules in the aftermath of the financial crisis.
The bank revealed in October that names, addresses, phone numbers and email addresses of the holders of about 83 million accounts were exposed when its systems were hacked.
News also emerged last month that regulators may require JPMorgan to increase its capital by about US$20 billion because of the complexity and size of its operations.