Big Banks Challenged By Legal Expenses And Lower Revenues

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

J.P. Morgan Chase & Co. 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, J.P. Morgan 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 Corporation 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 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. 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. 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.