JPMorgan results hit by legal costs

NEW YORK: JPMorgan Chase & Co reported a 7% decline in fourth-quarter earnings on Wednesday, hit by legal costs and lower trading revenue.

Wells Fargo & Co also reported its quarterly results. Its net income rose slightly and beat Wall Street expectations.

JPMorgan, the biggest bank in the US by assets, has been hit by legal costs over the past year as it settles lawsuits or other issues with state and federal regulators over its role in the housing bubble and subsequent financial crisis.

In the latest quarter, it took a charge of $990 million for legal expenses, more than analysts expected.

CEO Jamie Dimon said investors should expect more legal expenses this year as the bank continues to resolve its problems.

He said the bank had to deal with “five to six regulators’’ for every aspect of its legal issues.

Dimon also acknowledged that the bank, on occasion, has made mistakes.

JPMorgan earned $4.93 billion, or $1.19 a share, for the three-month period ending in December, compared with $5.28 billion, or $1.30 a share, a year earlier. Analysts were looking for JPMorgan to earn $1.31 a share.

Total revenue at the bank fell 3 percent to $22.5 billion.

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 bigger businesses. Fixed-income revenue fell 23% from the prior year to $2.5 billion.

“Those trading numbers came down harder than what analysts thought they would, so that’s largely why investors had an issue with their results,’’ said Fred Cannon, director of research for Keefe, Bruyette & Woods.

But there were signs that consumers were more willing to take on debt and spend more. Credit card balances rose 3% to $131 billion, while merchant processing volume, the amount of money spent on the bank’s credit and debit cards, climbed 13% from a year earlier. The bank processed 10.3 billion transactions in the quarter, up 7% from a year earlier. Auto loan originations rose 8% from the prior year.

Despite JPMorgan’s legal troubles, 2014 was a very profitable year. The company earned $21.8 billion, an increase of 21%. The gain came despite revenues remaining essentially flat.

Wells Fargo’s results were better than JPMorgan’s but the company still had issues that gave investors pause.

The San Francisco-based bank earned $5.38 billion in the fourth quarter, up from $5.37 billion a year earlier. That was after taking out dividends for preferred stock. On a per-share basis, adjusted earnings worked out to $1.02, matching Wall Street’s expectations.

Revenue rose 4% to $21.44 billion in the three months ending in December, which narrowly topped forecasts.

In a statement accompanying the results, John Shrewsberry, the bank’s chief financial officer, said making more loans helped boost revenue.

Total loans rose 5% to $862.55 billion, but the company’s net interest margin, which is how much a bank earns on its assets over the cost of doing business, fell slightly in the quarter. Net interest margin is closely followed by investors.

For all of 2014, Wells Fargo’s adjusted earnings climbed 4% to $21.82 billion, while revenue crept up 1% to $84.35 billion.