As go the banks, so goes much of the United States economy. Perhaps appropriately, on Friday the 13th, investors’ radar screens noted not so lucky tidings that befell the nation’s largest bank, putting markets throughout North America and the world under a cloud.
JPMorgan Chase (NYSE: JPM), in a sign that banks are getting something of a comeuppance for writing bad mortgages in the years leading up to the recession of 2008, revealed Friday that its net income plunged 23% in the last three months of fiscal 2011 to $3.7 billion U.S., or 90 cents a share, as revenues took a 17% hit to $22.2 billion. In the same quarter of fiscal 2010, the figure was $4.8 billion U.S., or $1.17 a share.
An Associated Press story out Friday reported that the bank set aside $528 million U.S. for additional litigation costs in the quarter, to fight lawsuits related to poorly-written mortgages during the real estate boom, an amount comes on top of $1.5 billion U.S. it set aside to fight litigation last year.
This doesn’t bode well for competitors like Bank of America Corp., which has been damaged far more than JPMorgan from lawsuit-related mortgages.
Shares in Morgan dipped $1.30 U.S., or 3.5%, by noon ET Friday, to $35.55.
The New York-based bank also reported that its income also took a hit because of turbulence in financial markets, which took a bite out of its investment banking fees, and an accounting charge. However, the AP piece continues, its customers were in better shape and more of them paid their credit card bills on time and took out more loans.
Indeed, JP Morgan’s corporate customers took on more loans, up 12% to $110 billion U.S. That suggests business owners are feeling more confident that demand for their products is picking up, leading potentially to new factories or warehouses, or bigger plants, which translates to new jobs being created.
JPM was the first major U.S. bank to report earnings. Citigroup Inc., Bank of America Corp. and Goldman Sachs Group Inc. report next week.
