JPMorgan Chase To Settle Allegation Charges
This is a bidnessetc.com article.
By Abdul Wasay
For years now banks have struggled to increase their profits amid tough regulations, low interest rates and heavy legal bills following the financial crisis. With the recent raise in short-term interest rates, markets tend to look at banks as the beneficiaries. But at the same time, it will be wrong to assume that the financial institutions no longer need to worry about legal costs.
According to a recent update by Reuters, JP Morgan Chase & Co. is expected to reach a deal on its charges with the regulators in the country. As per the sources privy to the matter, the bank is expected to pay around $200 million in fines to the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission.
The charges involve JPMorgan Chase & Co.’s (NYSE:JPM) failure to disclose the steering of clients into its proprietary products and its own funds. This practice let the ban earn extra fees but failed to disclose it properly. In filings with the SEC, JP Morgan disclosed that it had received subpoenas relating to “client disclosure concerning conflicts associated with the firm’s sale and use of proprietary products.”
Banks have been under intense scrutiny from the regulators lately. The decisions made prior to the crisis led to grim consequences, which resulted in extra vigilance, by the regulatory bodies. While the Dodd-Frank Act mostly oversees the capital and liquidity levels of a bank, other strict regulations scrutinize the usual operations of financial institutions.
JP Morgan is expected to pay a heavy fine to the federal regulators and this isn’t the first fine of the year. The bank was recently fined $3.9 million for control failures in its equity business. The investigation by the Securities and Futures Commission (SFC) revealed that the bank’s operations in Asia Pacific didn’t have adequate systems or controls in place. In its latest earnings release, the bank disclosed that its legal expenses increased to $1.3 billion against $291 million in the preceding quarter. While it is hard to determine when this recent settlement charge will be confirmed, investors are advised to look out for additional legal charges and an increase in bills in the fourth quarter earnings release.
The bank is expected to post $23.5 billion in revenue and $1.32 in earnings per share (EPS), representing year-over-year (YoY) increase of 4% in revenue and 10% decrease in EPS.
According to the data on Bloomberg, majority of analysts providing coverage on JP Morgan Chase stock remain bullish. 27 out of 37 suggest a Buy, 10 recommend a Hold, while none of the analysts advocate a Sell. The 12-month mean target price on the stock is $73.
JP Morgan closed down almost 2% at $66 yesterday.
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