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JPMorgan reports profit of $4.9 billion, but misses estimates; bank hit with legal costs

NEW YORK, N.Y. – JPMorgan Chase reported a 7 per cent drop in fourth-quarter earnings Wednesday, hit by more legal costs and a drop in trading revenue.

JPMorgan, which is the biggest U.S. bank by assets, said it earned $4.93 billion, or $1.19 a share, for the three-month period ending in December. That compares with a profit of $5.28 billion, or $1.30 a share, a year ago.

The results were hit by a $990 million after-tax charge for legal expenses, more than analysts expected. The bank’s results have been impacted by various legal costs over the last several quarters as it has settled lawsuits with state and federal regulators over its role in the housing bubble and subsequent financial crisis.

In a conference call with reporters, JPMorgan CEO Jamie Dimon said investors should expect more legal expenses this year.

“Banks are under assault,” Dimon said, noting that the bank has to deal with “five to six regulators” for every aspect of its legal issues.

Total revenue fell 3 per cent to $22.5 billion from $23.2 billion a year ago.

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 larger businesses. Fixed-income revenue fell 23 per cent from the prior year to $2.5 billion.

In the bank’s commercial banking division, which includes credit cards, checking accounts, mortgages, and auto loans, there are signs that consumers are more willing to take on debt and are spending more.

Credit card balances were up 3 per cent to $131 billion, while merchant processing volume, the amount of money being spent on the bank’s credit and debit cards, was up 13 per cent from a year ago. The bank processed 10.3 billion transactions in the quarter, up 7 per cent from a year ago.

The bank also had an 8 per cent increase from the prior year in auto loan originations.

The results missed Wall Street expectations. The average estimate of analysts surveyed by FactSet was for earnings of $1.31 a share.

Despite JPMorgan’s legal troubles, 2014 was a very profitable year for the bank. The company earned $21.8 billion last year, a 21 per cent increase from JPMorgan’s profit of $17.9 billion in 2013. The profit increase came despite revenues remaining mostly flat last year, at $94.2 billion from $96.6 billion a year ago.

JPMorgan’s miss hit its shares hard. The bank’s stock fell $2.65, or 4.5 per cent, to $56.20.