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

long boasted of a "fortress" balance sheet.

Dimon "has become a little bit less critical, a little bit less vocal, a little bit more humble," said Shannon Stemm, a stock analyst at brokerage Edward Jones. "He used to run the bank that really stood out for weathering the crisis better than others."

The bank's legal issues are legion. JPMorgan faces more than a dozen probes globally, including whether it fraudulently sold U.S. mortgage securities and whether it improperly fixed certain benchmark borrowing rates. The Securities and Exchange Commission is investigating whether the bank violated anti-bribery laws in hiring sons and daughters of executives of Chinese state-owned companies.

The Justice Department is looking into whether bank employees obstructed justice in a power market manipulation probe by the Federal Energy Regulatory Commission that the bank settled in July for $410 million. JPMorgan neither admitted nor denied violations.

Federal prosecutors in August brought criminal charges against two former JPMorgan traders, accusing the pair of deliberately understating losses in the "Whale" scandal. The SEC received an admission of wrongdoing from the bank in a parallel civil action, a rare step for the government agency.

In September, JPMorgan tried to reach a settlement with the U.S. Department of Justice and other federal and state agencies to resolve claims against the bank over its mortgage businesses. An $11 billion settlement was discussed, according to sources familiar with the matter. Dimon went to Washington to meet with U.S. Attorney General Eric Holder on September 25, but no deal has resulted.

Much of those claims relate to mortgage bank Washington Mutual and investment bank Bear Stearns, two failing firms that JPMorgan took over in 2008.

PAYOUT SEEN SAFE

Despite the clouds, the bank's shares are up 20 percent this year and its CEO still has many fans. JPMorgan shares closed down a penny at $52.51 on Friday.

"While headlines today suggest the government is looking to slap some fines on them for business units that underwrote or securitized various products, JPMorgan is still in far better shape than any peers," said Tom Jalics, senior investment analyst at Key Private Bank. "It's not even close."

Dimon, 57, became CEO on December 31, 2005, and added the post of chairman a year later.

JPMorgan's chief financial officer, Marianne Lake, said legal expenses would not affect stock repurchase plans and that the bank "has every intention to pay our dividends."

Even beyond the litigation expenses, the third-quarter results were less than spectacular, with

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