JP Morgan reveals 16% fall in profits

Investment banking giant JP Morgan Chase posted a 16% drop in profits today after a year of record fines that included its Madoff ponzi scheme settlement and London Whale trading scandal.

Kicking off the US bank earnings season, the group revealed net income fell to $17.9bn in 2013 after a fall of 7.3% in the last three months alone.

JP Morgan took another $1.1bn charge in “legal expenses” over the fourth quarter to cover $2.6bn in settlements for its failure to alert US authorities to the ponzi scheme run by Bernard Madoff, who is currently serving a 150-year prison sentence for fraud.

The group was also hit with a record $13bn penalty last year to settle claims it mis-sold mortgage securities in the run up to the financial crisis, while it forked out fines of $920m to US and UK regulators for the so-called London Whale affair.

The scandal spread shockwaves throughout financial markets after a series of large trades taken by staff in its London-based investment office triggered losses for the group of $6.2bn in 2012.

Pay and bonuses across the firm rose 1% to $30.8bn over 2013, although workers in its investment bank saw a 4% drop to $10.8bn.

The pay pot gives each of its 52,250 workers in the investment banking division - including several thousand in London – an average earnings package of $207,368 for last year.

Staff are set to find out individual bonus payouts in the middle of next week.

Jamie Dimon, chairman and chief executive of JP Morgan, said: “We are pleased to have made progress on our control, regulatory and litigation agendas and to have put some significant issues behind us this quarter.

“It was in the best interests of our company and shareholders for us to accept responsibility, resolve these issues and move forward,” he added.

While fourth quarter earnings fell to $5.3bn, they were better-than-expected by analysts, who had predicted net income of around $4.5bn.

Most of the bank’s divisions reported year-over-year increases in profits, but its investment banking business suffered a 57% decline in earnings after a series of accounting charges, including losses on the value of its own debt.

Its legal problems have weighed on the bank over the past two years, leading it to post its first quarterly loss in 10 years in October.

The group was also recently one of a raft of banks globally to settle with European regulators over rate-rigging allegations, paying €80m for actions relating to yen Libor.