JPMorgan Chase earnings reveal higher litigation costs
We noted recently that banks are boosting expenses, in search of revenue. In the first half of the year, operating expenses at the six biggest U.S. financial firms--Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley--grew $7.92 billion, or 5.9 percent, while revenue fell by $5.6 billion, or 2.2 percent. Some of this might be seen an "investment," but other costs--like litigation costs--are perhaps less likely to produce revenue streams.
JPMorgan Chase (NYSE: JPM) set aside $1.3 billion of additional litigation reserves during the quarter, which includes expenses for "mortgage-related matters."
"You know how many suits go on, the class-action suits, the stock drop, the Bear Stearns suits, the WaMu suits, the mortgage suits. And it ain't going away, it's becoming a cost of doing business," said CEO Jamie Dimon, notes Bloomberg. "When we're wrong, we're going to settle, and when we're right, we're going to fight," he said.
There's a lot of litigation in the works across the industry; this may be something to look for in third-quarter results. Bank of America (NYSE: BAC) and Goldman Sachs (NYSE: GS) report Tuesday. On Wednesday, Morgan Stanley (NYSE: MS) and Wells Fargo (NYSE: WFC) will follow.
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