JPMorgan Chase earnings reveal higher litigation costs

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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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