JPMorgan profit falls, hit by legal costs and lower trading

JPMorgan earnings drop on lower trading revenue

JPMorgan Chase & Co. reported a 7% drop in fourth-quarter earnings Wednesday, hit by more legal costs and a drop in trading revenue.

JPMorgan, the biggest U.S. bank by assets, said it earned $4.9 billion, or $1.19 a share, for the final three months of the year. That compares with a profit of nearly $5.3 billion, or $1.30 a share, for the previous year’s last quarter.

Total revenue fell 3% to $22.5 billion from $23.2 billion for the previous year’s fourth quarter.

The results were hurt by a $990-million after-tax charge for legal expenses, more than analysts expected. The bank's results have been impacted by various legal costs over the last several quarters as it has settled lawsuits with state and federal regulators over its role in the housing bubble and subsequent financial crisis.

In a conference call with reporters, JPMorgan Chief Executive Jamie Dimon said investors should expect more legal expenses this year.

“Banks are under assault,” Dimon said, noting that the bank has to deal with “five to six regulators” for every aspect of its legal issues.

Despite JPMorgan's legal troubles, 2014 was a very profitable year for the bank. The company earned $21.8 billion last year, a 21% increase from JPMorgan's profit of $17.9 billion in 2013. The profit increase came despite revenues remaining mostly flat last year, at $94.2 billion from $96.6 billion a year ago.

The results missed Wall Street expectations. The average estimate of analysts surveyed by FactSet Research Systems Inc. was for earnings of $1.31 a share. The miss hit shares hard. The bank's stock fell $2.65, or 4.5%, to $56.20.

JPMorgan's investment banking division was hit by the sale of its commodities trading division and a slowdown in bond trading, one of the bank's larger businesses. Fixed-income revenue fell 23% from the prior year to $2.5 billion.

In the bank's commercial banking division, which includes credit cards, checking accounts, mortgages, and auto loans, there are signs that consumers are more willing to take on debt and are spending more.

Credit card balances were up 3% to $131 billion, while merchant processing volume, the amount of money being spent on the bank's credit and debit cards, was up 13% from a year ago. The bank processed 10.3 billion transactions in the quarter, up 7% from a year ago.

The bank also had an 8% increase from the prior year in auto loan originations.

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