JPMorgan Chase & Co.
) will likely enter into another settlement involving a huge sum
of money. Though not officially confirmed, as per reports in
The Financial Times
The Wall Street Journal
, the company is in negotiation with a group of institutional
investors claiming nearly $6 billion.
It was alleged that JPMorgan along with its acquired units, Bear
Stearns and Washington Mutual, adopted faulty mortgage practices
which resulted in huge losses for these investors. The faulty
mortgage backed securities sold by the bank did not meet the
credit quality criteria and misled investors.
The claimants include asset mangers like
) and Neuberger Berman Group LLC. Though the settlement talks
have been continuing for the last two years, it gained momentum
Apart from the aforementioned settlement, the company is prepared
to resolve matters with various other agencies by entering a
multi-billion dollar settlement. Though the exact amount that
JPMorgan will be required to pay is not known, going by market
rumors, it could be around $13 billion.
The major probes being conducted by these regulatory agencies
pertain to cases filed by the New York AG and the Federal Housing
Finance Agency (FHFA). These cases are primarily related to the
mortgage-backed securities sold by JPMorgan to
JPMorgan has been embroiled in legal hassles for quite some time.
The bank's monetary reserves, kept apart for meeting legal
expenses, have weighed on its third-quarter earnings as well.
Reversing its earnings streak, JPMorgan posted a loss of 17 cents
However, even as JPMorgan struggles to cope with rising expenses,
we believe that the banking giant will regain its position in the
future. This will likely be due to improvement in trading
revenues, retail and investment banking performances as well as
Currently, JPMorgan carries a Zacks Rank #4 (Sell).
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