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JPMorgan’s $7.2 Billion in Legal Fees Weigh on Earnings

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JPMorgan’s $7.2 Billion in Legal Fees Weigh on Earnings

Shares of JPMorgan Chase (NYSE:JPM) traded slightly lower on Friday following the company’s third quarter results. Over the last few months the company has held a top spot within financial media headlines. Seemingly every week another lawsuit, allegation, and or problem emerged for the company. Since Jamie Dimon took the reigns in 2004 the company has amassed great fortunes and capital undermanagement. However, for the first time under his leadership the company reported a quarterly loss. To put this fact into perspective, the company remained profitable even during the worst days of the financial crisis.

JPMorgan reported a net loss of 17 cent per share, but excluding non-recurring items (litigation expense and reserve losses), JPMorgan’s core businesses earned EPS of $1.42. On the top line the company generated third quarter net revenue of $23.9 billion. These results were slightly better than the professionals on Wall Street had predicted. On average, analysts were expecting the bank to post adjusted earnings per share of $1.28 and revenue of $24 billion, according to data compiled by Bloomberg. As a result of the lawsuits, allegations, and problems, the company has been forced to invest heavily into its legal defense. These cost skyrocketed during the quarter to exceptional levels. The bank reported a mountain of legal costs of $7.2 billion.

These legal expenses were the cause of what appeared to be an alright quarter…

● Consumer & Community Banking deposits were up 10%
● Client investment assets were a record $179.0 billion, up 16%
● Credit card sales volume was a record $107.0 billion, up 11%
● Merchant processing volume of $185.9 billion, up 14%.
● The Corporate & Investment Bank maintained its #1 ranking for Global Investment Banking fees.
Client deposits were $386.0 billion, up 10%
● Assets under custody were a record $19.7 trillion
● Client assets were $2.2 trillion, up 11%
● Loan balances were a record $90.5 billion

Looking forward, we will hopefully get a little more clarity into the quality of the quarter early next week. Analysts across the street will be pouring into what was a confusing quarter this weekend.

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