JPMorgan is the largest bank by asset holdings in the United States. The firm has recently increased its reserve allocated to litigation and legal costs by more than $1.5 billion. Chief Financial Officer Marianna Lake commented at the Barclays Global Financial Services Conference in New York yesterday. “This addition to reserves covers a number of different matters, some of which you’ve been reading about.” The firm commented that relative to the activity in the past few weeks that their response is appropriate and accurately timed.
JPMorgan company added 3000 additional employees to internal control and compliance, bolstering their teams in an effort to handle “multiple investigations and regulatory orders,” according to Bloomberg. The company is faced with criminal investigations by the Justice Department concerning JPMorgan’s energy trading and mortgage-backed securities. They are also handling inquiries and probes into its anti-money laundering capacity, credit card collection, foreclosures, and the trading losses in London last year.
Though JPMorgan’s CFO Marianna Lake feels that the firm has enough cash to weather the legal storms, “the final cost could change.” CFO Lake declined to give further estimations on how large the legal costs could balloon to, or how large the “litigation reserve” would end up being.
Two new members were named to the firm’s board, and certain powers were expanded “to help bolster oversight.” In this period of legal smattering, the company needs to bolster its internal control and oversight image as well as literally in the company. In this way investors will regain their confidence that no more London Whales, or energy and mortgage mishaps may occur.
This quarter will see a 16 percent drop in revenue from last quarter’s $4.77 billion. Third quarter revenue is forecasted to decrease by about 5 percent. Trading revenue is forecasted to be “not as strong as last year.” Before tax profit margins and income on mortgage lending is forecasted to be “slightly negative.” The company does anticipate a “more normal rate environment in [the] longer term.”