JPMorgan Has Massive Earnings And Still Pays A Large Legal Bill

The country’s largest bank had almost $25 billion in revenues and almost $500 million in legal expenses.

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JPMorgan Chase, the country's biggest bank by assets and the first major bank to report its earnings for the first quarter, slightly beat out analysts' expectations, but was still dragged down by high aftertax legal expenses of $487 million.

For the first three months of the year, JPMorgan had $24.8 billion in revenue, above Wall Street analysts expectations of $24.5 billion and up from the first quarter of last year's $23.9 billion. With adjustments for taxes, JPMorgan had profits of $1.45 per share, or $5.9 billion, beating expectations of analysts polled by Bloomberg of $1.41 per share and up from $1.28 in earnings in this quarter last year, when the industry as a whole was weighed down by sluggish trading revenues.

JPMorgan's bonds, currency, and commodities operations had massive revenues, some $4.1 billion, just above analysts' projections, and up about 5% from a year ago — but excluding the sale of some of its commodities trading businesses, the increase would have been about 20%, the company said today. Its equities trading business had revenues of $1.6 billion, a 22% jump from the year before and above expectations of $1.4 billion. The bank said that the strong performance was due to gains in currencies and rates trading, especially in emerging markets.

While the legal expense of almost $500 million would be high for a different bank in a pre-crisis time, paying such large bills for expected litigation and settlements has became standard for JPMorgan — last quarter the bank dislcosed a $990 million legal expense, linked to a longstanding investigation in many banks' currency trading practices. Earlier this year, JPMorgan reached a settlement of about $100 million in a antitrust suit brought by investors in federal court in New York.

In its last earnings presentation and at an investors' conference in February, JPMorgan executives defended the bank's massive scale and diversity of businessess — everything from credit cards to mortgages to large-scale commercial lending to trading and investment banking — at length. While regulators have not particularly targeted JPMorgan for a breakup, they have proposed and instituted new rules that go after the biggest and most complex financial institutions.

"JPMorgan Chase continues to support consumers, businesses and communities and make a significant positive impact. We have an outstanding franchise which is getting safer and stronger, and is gaining market share over time," Dimon said in statement today.

While JPMorgan hasn't had its requests for increased dividends or buybacks rejected by the Federal Reserve like its megabank rivals Citi or Bank of America, JPMorgan chairman and chief executive Jamie Dimon said in his letter to investors that recent finalized and proposed changes in bank regulation that target larger or more complex banks do not necessarily reflect the actual riskiness of the bank's activities.

"We continue to build the company for the long-term, we are investing in controls, infrastructure, systems, technology, new products and bankers. We will continue to navigate challenges and deliver for our clients, shareholders and communities," Dimon said.

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