The Slide Of JP Morgan's Earnings Presentation No Investor Wants To See

This morning JP Morgan reported its first quarterly net loss ever under the leadership of CEO Jamie Dimon — a net loss of 17 cent per share.

Yes, you’ll remember that this even includes the carnage of the financial crisis.

The losses were caused by mounting legal costs the bank incurred from a regulatory crack down on a wide range of its operations, from energy trading violations to fines paid for legacy mortgage back securities the bank inherited when it purchased Bear Stearns.

The worst part of that is that, based on JPM’s earnings call, the bank clearly believes this isn’t over. Back in 2010 they kept legal reserves at $US3 billion, now it’s up to a whopping $US23 billion (as you can see below in the table from JPM’s earnings presentation).

On the call, CFO Maryanne Lake said the bank was in a “highly charged and very volatile” legal environment, “far beyond what we reasonably expected… even a few weeks ago.”

The bank expected a Q3 legal loss of $US5.7 billion and incurred losses of $US8 billion.

Quarter over quarter, Lake said, the deployment of these funds to settle the bank’s legal issues will be “lumpy.”

So shareholders can expect a “lumpy” ride.

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