NEW YORK - Mounting legal costs pushed JPMorgan Chase to a rare loss in the third quarter, the first under the leadership of CEO Jamie Dimon.
The largest U.S. bank by assets set aside $9.2 billion in the quarter to cover a string of litigation stemming from the housing crisis and the bank's "London Whale" trading debacle.
JPMorgan said it has placed a total of $23 billion in reserve to cover potential legal costs, including the $9.2 billion.
While JPMorgan emerged from the financial crisis and the Great Recession as one of the strongest U.S. banks, it has been dogged by legal problems in recent years.
Last month, it agreed to pay $920 million and admitted that it failed to oversee trading that led to a huge $6 billion loss last year. That episode came to be known as the "London Whale," referring to the location of the trader who made those oversized bets.
The bank said in August that it is facing a federal criminal investigation focused on mortgage-backed securities sold before the financial crisis. Federal energy regulators, meanwhile, are investigating some of the company's bidding practices in energy markets.
The bank is also said to be discussing an $11 billion national settlement with the Department of Justice over mortgage-backed securities. The securities lost value after a bubble in the housing market burst, helping to bring on the financial crisis.
JP Morgan lost $380 million in the third quarter, compared with net income of $5.7 billion a year earlier.
The bank's total revenue fell 8 percent to $23.9 billion, missing analysts' estimate of $24.1 billion. The overall quarterly loss was the bank's first since the second quarter of 2004, before the global financial crisis and the start of Dimon's tenure as CEO in December 2005.
Record profit for Wells Fargo
Wells Fargo once again posted a record profit - $5.32 billion - in the third quarter, despite the long-expected slowdown in its mortgage division. It marked the 10th straight quarter of record profits at the San Francisco bank. Mortgage banking income, however, fell more than 40 percent from the quarter before, to $1.6 billion, while the bank's mortgage originations fell nearly 30 percent. Wells was able to increase its profits primarily by setting aside less money for bad loans and releasing about $900 million it had set aside before.