JPMorgan Chase Misses as $990 Million Legal Expense Hits Earnings

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JPMorgan hit with $990M legal expense

Earnings HQ: FBN's Cheryl Casone breaks down JPMorgan's fourth-quarter earnings report.

JPMorgan Chase & Co (JPM), the biggest U.S. bank by assets, reported a 6.6 percent drop in quarterly profit as legal costs exceeded $1 billion in the wake of government probes into alleged wrongdoing and it set aside more to cover bad loans.

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The bank's net income fell to $4.93 billion, or $1.19 per share, in the fourth quarter from $5.28 billion, or $1.30 per share a year earlier. Revenue on a managed basis fell 2.3 percent to $23.55 billion.

Analysts on average had expected earnings of $1.31 per share on revenue of $23.64 billion, according to Thomson Reuters I/B/E/S. The results for both periods included special items.

JP Morgan's shares were down 1.2 percent in premarket trading on Wednesday.

The bank said legal expenses rose to about $1.1 billion in the quarter from about $847 million a year earlier. After tax, legal expenses totaled $990 million.

Profit last year was hit by government penalties for failing to report suspicions of fraud by Ponzi-schemer Bernie Madoff.

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JPMorgan, the first big U.S. bank to report quarterly earnings, set out to resolve the bulk of its legal liabilities in 2013, when it agreed to pay more than $20 billion in settlements, but litigation costs remain high.

The bank agreed in November to pay a total of $1 billion in penalties to a regulator in the UK and two in the United States over its conduct in foreign exchange markets. Investigations into that and other areas of the bank's business are continuing.

Revenue from fixed-income trading, JPMorgan's most volatile business, fell 23 percent to $2.5 billion. Taking into account the sale of the bank's physical commodities business and accounting changes, revenue fell 14 percent.

Revenue from home loans fell $405 million to $1.9 billion.

JPMorgan said it paid its investment bank employees 27 percent of revenue in 2014, down from 33 percent in 2013, in a record year for both IPOs and mergers and acquisitions.

(Reporting by Tanya Agrawal in Bengaluru and David Henry in New York; Editing by Ted Kerr)