Bloomberg – by Hugh Son and Michael J. Moore
JPMorgan Chase & Co. (JPM) said it faces a U.S. criminal probe into foreign-exchange dealings and boosted its maximum estimate for “reasonably possible” losses on legal cases to the highest in more than a year. The shares fell in New York.
The firm is cooperating with the criminal investigation by the Department of Justice as well as inquiries by regulators in the U.K. and elsewhere, it said yesterday in a quarterly report. The largest U.S. bank said it might need as much as $5.9 billion to cover losses beyond reserves for legal matters, up $1.3 billion from the end of June, and the most since since mid-2013.
“In recent months, U.S. government officials have emphasized their willingness to bring criminal actions against financial institutions,” the bank wrote of the general legal environment. “Such actions can have significant collateral consequences for a subject financial institution, including loss of customers and business.”
Chief Executive Officer Jamie Dimon, 58, who led the New York-based firm through $23 billion in settlements last year, is contending with an international probe into whether traders at the biggest banks sought to profit by rigging currency rates.Citigroup Inc. (C) and Zurich-based UBS AG disclosed last week they also face criminal inquiries by the Justice Department into their foreign-exchange dealings. Citigroup cut third-quarter results to include a $600 million legal charge.
‘No Assurance’
“These investigations are focused on the firm’s spot FX trading activities as well as controls applicable to those activities,” JPMorgan said in its report. While the company is in talks to resolve the cases, “there is no assurance that such discussions will result in settlements,” it said.
JPMorgan slid 1.7 percent to $59.87 at 9:52 a.m., the most in more than two weeks and the worst performance in the KBW Bank Index. (BKX) The shares have gained 2.5 percent this year, compared with the 3.9 percent advance of the 24-company index.
Banks are facing foreign-exchange probes by authorities on three continents, people with knowledge of the situation have said. Richard Usher, JPMorgan’s chief currency dealer in London, left the company amid efforts to settle a U.K. probe into allegations of foreign-exchange rigging, people with knowledge of the moves said last month. He hasn’t been accused of any wrongdoing.
Holder’s View
JPMorgan booked $1.01 billion in legal expenses during the third quarter, tied “in large part” to the currency probes, Chief Financial Officer Marianne Lake said on Oct. 14. Cases could cost banks as much as $41 billion combined to settle, analysts at New York-based Citigroup, led by Kinner Lakhani, said last month.
The bank separately estimated that fourth-quarter sales and trading revenue will drop by about $300 million, or 8 percent, amid a push to simplify the company. Costs in the division will be lowered by about $200 million as the firm sells units including its physical commodities business as part of that effort, it said.
U.S. Attorney General Eric Holder announced in May that authorities were pursuing criminal cases against banks, showing that financial institutions aren’t too big to prosecute. The Justice Department later wrested guilty pleas — once viewed as a death penalty for a bank — from Credit Suisse Group AG (CSGN)’s main bank subsidiary for helping Americans avoid taxes, and from BNP Paribas SA (BNP) for handling banned transactions involving Sudan, Iran and Cuba.
SEC Directive
U.S. firms began disclosing estimates for possible legal losses after the U.S. Securities and Exchange Commission told finance chiefs in 2010 they should provide investor guidance “when there is at least a reasonable possibility” costs will be incurred, even if the risk is too low to require reserves.
JPMorgan said its estimated range, spanning no cost to as much as $5.9 billion as of Sept. 30, “involves significant judgment, given the varying stages of the proceedings.” It already has set aside money to cover several hundred legal proceedings, and it may boost those accruals further if additional expenses become probable.
To contact the reporters on this story: Hugh Son in New York athson1@bloomberg.net; Michael J. Moore in New York atmmoore55@bloomberg.net
To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net David Scheer, Steven Crabill
All these supposed fines are nothing more that a re-route of (stolen tax payer) monies back into the elites hands to make it look like the regulators are doing their job. This whole economy is propped up on a toothpick made nothing short of balsa wood.
Now that these fictitious elections are over, I expect to see a full spectrum asymmetrical onslaught brought forward like this nation has never witnessed.
Anyone else feel the same?
Holder and the DOJ going after a to big to fail bank? Now THAT’S an oxymoron.