As it currently stands, JPMorgan's recent earnings indicate its profits are reliant on credit expense reductions such as loan loss reserve releases and on volatile investment banking and trading businesses.
After a settlement is disclosed to investors, will JPMorgan have the earnings power to regain its top standing in the banking sector?
Earlier in October, JPMorgan reported a third-quarter loss of $400 million, or 17 cents a share, on revenue of $23.9 billion. That loss was the first under CEO Dimon and was attributable to $9.15 billion in pretax expense and $7.2 billion in after-tax expense related to a rising provision for the bank's legal expense.
The bank said in a presentation appended to its third-quarter earnings that since 2010 it has added $28 billion to its legal reserves, offset by a $8 billion reduction attributable to settlements and legal judgments. Overall, reserves for litigation have cost the bank approximately $23 billion in net income over that time span.
On a conference call, JPMorgan said the firm likely wouldn't be doing much share buyback activity for the rest of 2013. Earlier in 2013, the company announced a $6 billion share buyback authorization.
While legal issues are depressing JPMorgan's current earnings, they could eventually become a drag across the banking industry.
JPMorgan spokesperson Mark A. Kornblau declined to comment.
-- Written by Antoine Gara in New York.