JP Morgan returns to profit in third quarter; Bank sets aside $1 billion for legal costs

NEW YORK, N.Y. – JPMorgan Chase, the largest U.S. bank by assets, on Tuesday reported a third-quarter profit after booking a loss in the same period a year ago, when the company absorbed a big charge for legal expenses.

The bank reported earnings of $5.6 billion, or $1.36 share, compared with a loss of $380 million, or 17 cents a share, in the same period a year ago. Revenue for the period rose 5 per cent to $24.25 billion from $23.12 billion a year ago.

Despite returning to profit, the bank’s earnings fell short of analyst’s expectations.

The bank set aside a further $1 billion to cover more legal costs. JPMorgan and other banks are facing allegations that they manipulated foreign-exchange rates to the detriment of their clients. The money will help cover some of the resulting legal costs. Last year the charge for litigation costs amounted to $9.2 billion.

Jamie Dimon, JPMorgan’s CEO, said that a slowing global economy will impact some of JPMorgan’s businesses such as trading and investment banking. Other areas though, such as its retail and credit card business, which are more focused on the U.S., would likely be unaffected.

“You’re still going to have growth in America, which is a very good thing,” Dimon said, on a call with reporters.

Tuesday’s results missed the expectations of Wall Street analysts who had forecast earnings of $1.38 a share, according to FactSet. JPMorgan’s stock price fell 20 cents, or 0.3 per cent, to $57.96.

Citigroup and Wells Fargo also reported third-quarter earnings on Tuesday.

Citi reported earnings of $3.44 billion, or $1.07 a share, for the three-month period ending in Sept. 30. Stripping out one-time items, Citi said it earned an adjusted profit of $3.67 billion, or $1.15 a share. The results exceeded Wall Street expectations. The average estimate of analysts surveyed by FactSet was for earnings of $1.12 a share.

The bank also announced that it would bow out of the retail banking business in 11 markets as part of its ongoing effort to restructure and slim down since the financial crisis.

Wells Fargo, which is based in San Francisco, said it had third-quarter earnings $5.73 billion, equivalent to $1.02 per share. The results were in line with analysts’ expectations.