UPDATE 2-JPMorgan posts first quarterly loss under Dimon

Reuters

(Corrects analysts' average forecast in 5th paragraph to $1.17per share from $1.20; the error first appeared in UPDATE 1)

By David Henry

Oct 11 (Reuters) - JPMorgan Chase & Co on Fridayposted its first quarterly loss under Chairman and CEO JamieDimon after a tangle of legal and regulatory probes cost thebiggest U.S. bank $7.2 billion.

Dimon managed to avoid posting losses during the financialcrisis as the bank shied away from the worst subprime mortgageassets. But now legal woes, at least some tied to banks thatJPMorgan bought during the crisis, are taking a toll.

JPMorgan posted a loss of $380 million, or 17 cents pershare, for the third quarter, its first loss since the secondquarter of 2004. A year earlier it reported a profit of $5.71billion, or $1.40 a share.

Excluding litigation expenses and other special items, thecompany posted a profit of $5.82 billion, or $1.42 per share.

Analysts on average had forecast earnings of $1.17 per share excluding special items, according to Thomson Reuters I/B/E/S.It was not immediately clear if the results were comparable.

The legal expenses - $9.2 billion, or $7.2 billion aftertaxes - include money it is setting aside for futuresettlements. The bank disclosed exactly how much it has setaside for settlements, fines and other legal expenses: $23billion.

"While we expect our litigation costs should abate andnormalize over time, they may continue to be volatile over thenext several quarters," Dimon said in a statement.

JPMorgan faces a welter of regulatory issues, including aSecurities and Exchange Commission investigation into possiblebribery in the hiring of sons and daughters of executives ofChinese state-owned companies, possibly fraudulent sales ofmortgage securities, and its role in setting certain benchmarkborrowing rates.

The bank has been focusing on its mortgage issues recently.In September, it tried to reach a settlement with the U.S.Department of Justice and other federal and state agencies inwhich it could have paid as much as $11 billion to resolveclaims against the bank over its mortgage businesses. Dimon wentto Washington to meet with U.S. Attorney General Eric Holder onSept. 25 as part of the talks, but no deal has resulted.

Some of those claims relate to mortgage bank WashingtonMutual and investment bank Bear Stearns, two failing companiesthat JPMorgan took over in 2008.

Regulators pressed JPMorgan to acquire both companies, afact that Dimon alluded to in a statement on Friday, noting thatthe bank was seeking a fair settlement with the government onmortgage related issues, "and one that recognizes theextraordinary circumstances of the Bear Stearns and WashingtonMutual transactions, which were undertaken at the request orencouragement of the U.S. Government."

Speaking on CNBC earlier this month, former TreasurySecretary Hank Paulson said that JPMorgan was "begged" to takeWashington Mutual and Bear Stearns, but added that JPMorgan tookon potential legal liabilities as part of the deal. "Jamie knewthat at the time," Paulson said.

(Reporting by David Henry in New York; Additional reporting byTanya Agrawal in Bangalore and Lauren Tara LaCapra in New York;Editing by John Wallace)

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