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Big Banks Are Being Challenged By Legal Expenses (And Lower Revenues)

Big Banks Are Being Challenged By Legal Expenses And Lower Revenues

Shares of large banks have been rattled by disappointing Q4 earnings results this week.

JPMorgan Chase & Co. (NYSE: JPM) posted lower-than-expected profits partly due to nearly $1 billion in legal charges. EPS came in at $1.19, well below expectations of $1.31 and revenue declined 2 percent to $23.6 billion.

On a conference call with reporters, JPMorgan CEO Jamie Dimon said, “We have five or six regulators or people coming after us on every different issue. It’s a hard thing to deal with.”

Bank of America Corp (NYSE: BAC) has also had its share of legal expenses. In Q4, however, its litigation expense shrank to $393 million from $2.3 billion.

Bank of America’s shrinking legal bill was not enough to keep it from disappointing investors after it posted EPS of $0.25 versus expectations of $0.31. Revenue also fell short, coming in at $18.73 billion, below expectations of $20.94 billion.

Shares of Wells Fargo & Co (NYSE: WFC) fared somewhat after it posted EPS of $1.02, which was inline with estimates. Revenue was $21.4 billion, slightly above estimates of $21.2 billion.

Citigroup Inc (NYSE: C) reported a significant drop in its Q4 profit, which was impacted by legal and restructuring charges of $3.5 billion, versus $1.0 billion in the previous year period.

Citigroup also saw its Markets and Securities Services revenues decline 9 percent to $3.0 billion.

Goldman Sachs Group Inc (NYSE: GS) is scheduled to report Q4 results Friday morning. Analysts expect EPS of $4.32 on revenue of $7.64 billion.

Based on the performance of the other large banks, investors may want to keep a close eye on Goldman's legal costs and revenue from trading activities.

Image credit: Joe Mabel, Wikimedia


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