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JPMorgan posts first loss since 2004, a blow to Jamie Dimon

Oct 12 2013, 13:02 IST
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Workers are reflected in the windows of the Canary Wharf offices of JP Morgan in London. (Reuters) Workers are reflected in the windows of the Canary Wharf offices of JP Morgan in London. (Reuters)
SummaryMortgage banking income declined at JPMorgan, with net revenue falling 45 pct to $2.02 bn

Jamie Dimon, JPMorgan Chase & Co Inc's hard-charging chief executive, looked a bit more vulnerable on Friday after the bank took a $7.2 billion hit from litigation expenses and posted its first quarterly loss since 2004.

The loss is a blow to Dimon, who has long used the bank's steady profit as a shield to ward off critics of its mounting regulatory and legal issues. The bank for the first time said it has stockpiled reserves of $23 billion for expected settlements and other legal expenses.

In unusually humble language for a CEO once lionized on Wall Street and in Washington, Dimon said that the first loss under his leadership was "very painful for me personally."

JPMorgan reported a loss of $380 million, or 17 cents per share, for the third quarter. A year earlier it posted a profit of $5.71 billion, or $1.40 a share.

Dimon earned widespread praise as a risk manager for avoiding most of the mortgage-related losses that hobbled rivals during the financial crisis. But he was less adept at anticipating legal expenses.

"His halo is a little off-kilter at this point," said Jordan Posner, a senior portfolio manager at Matrix Asset Advisors of New York, which owns over 600,000 JPMorgan shares.

The third-quarter legal hit includes money set aside for future settlements. Dimon cautioned that these expenses will likely be elevated for the next year or two.

"I wish we could reduce the uncertainty for investors, but we can't," he told reporters in a conference call.

Later, in a conference call with investors, he said it is "very hard to fight with your regulators and the federal government."

Even putting litigation aside, revenue fell and other results were lukewarm. Weak fixed-income markets squeezed revenue at JPMorgan's investment bank, off 2 percent from a year ago and down 17 percent from the second quarter, reflecting the tough environment for bond-trading at all Wall Street banks.

Equity markets revenue gained 20 percent. Rivals such as Goldman Sachs Group Inc and Morgan Stanley, both due to report earnings next week, tend to be more heavily weighted in fixed income.

"HIT FROM ALL SIDES"

JPMorgan executives have long been quick to point out the bank's profitability when investors bring up its troubles. The bank posted record profits last year, even as bad derivatives bets known as the "London whale" trades resulted in $6 billion of losses.

But the third-quarter loss underscores how legal problems threaten the profitability of a bank that has

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