Updated to include details on Bank of America mortgage settlement deal reported by The Wall Street Journal Friday
NEW YORK (TheStreet)-- As U.S. banks still struggle to put the 2008 crisis behind them, legal overhang remains a major issue.
Whether its big institutional investors who say banks must repurchase bonds stuffed with fraudulent home loans, homeowners or attorneys general suing over improper foreclosures, or merchants suing over anticompetitive credit card fees, banks have no shortage of legal hassles. JPMorgan Chase (JPM) alone is fighting 10,000 lawsuits.
Here, courtesy of Nomura, are the five banks facing the biggest litigation costs beyond what they have already set aside as a percentage of consensus earnings for 2012-2013.5. JPMorgan Chase With 10,000 lawsuits against them, you knew they'd be on the list somewhere. JPMorgan estimates it faces up to $3.315 billion in litigation after taxes, beyond what it has already paid out or reserved against. That adds up to 8.8% of the $37.612 billion JPMorgan is expected to earn in 2012-2013. In 2011, JPMorgan's noninterest expense included $3.2 billion of litigation expense, mostly for mortgage-related matters, compared with $5.7 billion of litigation expense in 2010, according to Nomura's report 4. Citigroup (C) Citigroup estimates it is on the hook for up to $2.6 billion in litigation after taxes, beyond what it has already paid out or reserved against. That adds up to 9.9% of the $26.364 billion Citigroup is expected to earn in 2012-2013. Citigroup faces a variety of regulatory inquiries and class action lawsuits related to its mortgage origination practices. The private lawsuits will not be included in a National Mortgage Settlement, reached last month with 49 state attorneys general and the federal government. Bank of America (BAC), JPMorgan, Wells Fargo (WFC) and Ally Financial, the former GMAC, were also part of the settlement. 3. Bank of America Bank of America estimates it faces up to $2.34 billion in litigation expenses after taxes, beyond what it has already paid out or reserved against. That would equate to 10.9% of the $21.455 billion the bank is expected to earn in 2012-2013. The bank faces lawsuits related to mortgage originations and servicing, as well as for alleged failure to disclose its knowledge of ballooning losses at Merrill Lynch ahead of its eventual acquisition of that company.
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