US banks have started to announce their results for Q4 2014, revealing a large hit to balance sheets from legal expenses with JPMorgan Chase spending $1.1bn and Citigroup $2.9bn, just in the three months to 31 December 2014.
Citigroup posted its $2.9bn in legal and related expenses after a year which started poorly with legal spend up 33% in Q1 2014 to $945m compared to the start of 2013. The bank was also hit in July by a $7bn settlement with US authorities over its treatment of residential mortgage-backed securities.
The last quarter figure is up 81% in comparison to a $1.6bn bill in the third quarter of the year while, in the last quarter of 2013 the bank paid out just $809m.
The $2.9bn charge is close to the $3bn the lender paid out entirely in 2013 for legal expenses and brings the total paid in 2014 to $5.8bn. Most of the expenditure came from Citicorp which accounted for $2.8bn while Citiholdings made up just $61m, a reverse of the situation last year which saw Citiholdings make up the majority.
The legal expenses have seen the bank’s net income drop for the quarter from $2.5bn in Q4 2013 to $350m this year, as revenues remained broadly flat.
JPMorgan Chase revealed slightly better figures yesterday, but still paid out $1.1bn in pre-tax legal expenses for Q4 2014, an increase of 30% compared to the $847m in the same period last year. This fell post-tax to a round $1bn.
michael.west@legalease.co.uk
