JPMorgan share price down, fourth-quarter performance hit by legal costs

JPMorgan Chase & Co announced on Wednesday a decline in earnings due to a drop in revenue from fixed-income trading and higher than expected legal costs.

Net income decreased to $4.9 billion during the fourth quarter from $5.3 billion a year earlier. Earnings per share stood at $1.19 versus $1.30 a year ago. Analysts have projected net income of $5 billion and earnings per share of $1.31.

Revenue from fixed-income trading dropped 23% to $2.5 billion, the weaker results was driven by lower revenues from credit-related and securitized products. The sales of JPMorgans physical commodities and global special opportunities businesses also contributed to performance. Excluding the sales, fixed-income trading revenue was down 14%.

Meanwhile, revenue from equity trading increased 25% year-on-year to $1.1 billion, boosted by higher revenues from derivatives and prime services.

Revenue from mortgages stood at $1.9 billion, $405 million lower compared to last year. Investment banking fees jumped 8% to $1.8 billion, boosted by record debt underwriting fees of $1.1 billion, up 31% versus the prior year.

Performance in the fourth quarter was hurt by the $1.1 billion in legal expense the company reported, up from the $847 million during Q4 of 2014. However, overall legal costs for the year stood at $2.9 billion, a major improvement versus the record of $11.1 billion in 2013. JPMorgan has disclosed more than $25 billion in legal charges since 2010.

“2014 was a record year for the Firm for net income and EPS. We delivered on our commitments and meeting our capital targets for the year,” Chief Executive Officer Jamie Dimon said in a statement.

Legal expense was higher than most expected, including a projections of $500 million by Matthew Burnell, managing director of Wells Fargo Securities, and an estimate of $400 million by John McDonald, an analyst at Sanford C. Bernstein & Co.

Legal cost were higher, mostly due to the $1 billion charge that the bank agreed to pay to resolve US and UK investigations into manipulating the forex markets.

“Each of our businesses and the company are very well positioned going into 2015 for long-term growth and success,” Mr. Dimon added.

JPMorgan gained 0.02% on Tuesday and closed at $58.84 in New York. On Wednesday the stock fell 3.60% to $56.72 at 14:43 GMT, marking a one-year decrease of 2.11%. The company is valued at $219.96 billion.

According to the Financial Times, the 28 analysts offering 12-month price targets for JPMorgan Chase & Co. have a median target of $68.50, with a high estimate of $76.00 and a low estimate of $61.00. The median estimate represents a 16.42% increase from the last close price.