JPMorgan Chase & Co.’s quarterly profit fell 7.3% on $2.6 billion of settlements tied to Bernard Madoff’s Ponzi scheme as rising legal costs ended the firm’s three-year streak of record annual earnings.
Fourth-quarter net income declined to $5.28 billion, or $1.30 a share, from $5.69 billion, or $1.39, a year earlier, according to a statement today from New York-based JPMorgan, the biggest U.S. bank. Results excluding the Madoff settlement and other one-time items were $1.40 a share. Twenty-two analysts surveyed by Bloomberg estimated $1.37 on average.
Chief Executive Officer Jamie Dimon, 57, is whittling down the firm’s list of legal woes that include allegations it misled buyers of mortgage bonds, rigged markets and turned a blind eye to suspicious activity by customers. The Madoff agreement, which the bank said last week reduced fourth-quarter profit by about $850 million, capped a year in which JPMorgan spent more than $23 billion on legal settlements.
“All things considered, it wasn’t a bad quarter,” said Pri de Silva, senior banking analyst at CreditSights Inc. in New York. “They had something close to a kitchen-sink quarter getting some legal issues done.”
Shares of the company rose to $57.80 at 7:22 a.m. in New York from $57.70 at the close yesterday. The stock climbed 33% last year, compared with the 35% gain of the 24- company KBW Bank Index, the benchmark’s best annual performance since 1997.
Revenue dropped 1.1% to $24.1 billion while expenses declined 3.1% to $15.6 billion. Full-year profit fell 16% to $17.9 billion.
Earnings at the corporate and investment bank tumbled 57% to $858 million, driven by a $1.5 billion charge from changing the valuation of some over-the-counter derivatives to incorporate funding costs. So-called funding valuation adjustments, or FVA, estimate a present value of those funding costs rather than spreading them over the life of the derivative contract.
Revenue at the unit fell 21% from a year earlier to $6.02 billion.
Net income from consumer and community banking climbed 19% to $2.37 billion as provisions for credit losses fell and expenses declined. Revenue was $11.3 billion, down 8% from a year earlier.
Mortgage fees and related income dropped 46% to $1.09 billion in the quarter, from $2.04 billion a year earlier. Home-loan originations were $23.3 billion, down 54%.