NEW YORK (TheStreet) -- JPMorgan (JPM) is boosting its litigation reserve by $7.2 billion after taxes, as the nation's largest bank by assets braces for a set of costly legal settlements with regulators on activities the bank and its acquired units such as Washington Mutual and Bear Stearns made during the housing boom.
JPMorgan's multi-billion dollar addition to its legal reserve wiped out the firm's third-quarter profit and signals that CEO Jamie Dimon may be working on a settlement to resolve most of the outstanding legal liabilities of the bank.
JPMorgan said in a presentation appended to its 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.
JPMorgan reported a third-quarter loss of $400 million, or 17 cents a share, on revenue of $23.9 billion. That loss 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, however, also said results included a $1.6 billion pretax benefit from reduced reserves to its consumer and community banking business.
Excluding those one-time items, JPMorgan reported $5.8 billion in net income, or $1.42 in earnings per share, which beat bottom-line profitability estimates of $1.30. The bank's $23.9 billion in revenue fell slightly short of consensus Wall Street forecasts closer to $24 billion, according to Bloomberg data.