News Column

JPMorgan, Goldman Hit Profit Homers

Jan. 17, 2013

From staff and wire reports

Quarterly earnings from financial heavyweights JPMorgan Chase and Goldman Sachs sailed past analyst estimates, the banks said Wednesday.

But JPMorgan's board cut CEO Jamie Dimon's pay in half for 2012, declaring in a statement that the chief executive bore "ultimate responsibility" for management failures leading to a $6.2 billion trading loss in its London office last year.

The episode resulted in the ouster of the bank's chief investment officer and others, including the London trader known as the "London whale," who was responsible for the bad trades.

This week, JPMorgan agreed to a settlement with federal banking regulators requiring it to tighten supervision and risk-management practices whose weaknesses regulators said contributed to incident.

Dimon was paid $11.5 million last year, including $1.5 million in salary and restricted stock units worth $10 million. In 2011, he received the same salary and $21.5 million in restricted stock, which made him the best-paid CEO among the nation's top banks.

The board also required that Dimon wait another 18 months before he can exercise 2 million options granted to him in 2008 that were to vest this month.

"The board views the CIO (Chief Investment Office) losses as a serious mistake by the firm, but believes that one of the marks of a successful company and its leadership is how it addresses its mistakes, learns from them and implements meaningful remedial actions," the board said in a statement.

"As chief executive officer, Mr. Dimon bears ultimate responsibility for the failures that led to the losses and has accepted responsibility for such failures."

The board praised Dimon for his handling of the crisis after he learned about it. It criticized the CIO's former leaders, saying they did not keep the board informed of potential problems and had used unapproved models for calculating risk.

JPMorgan, the biggest U.S. bank by assets, earned $5.7 billion, or $1.39 a share, in the fourth quarter, compared with $3.7 billion, or 90 cents a share, a year ago. It was expected to earn $1.19 a share, according to the average forecast of analysts surveyed by FactSet.

Goldman Sachs earned $5.60 a share, compared with $1.84 a share for the fourth quarter of 2011. Goldman was expected to earn $3.71 a share, according to FactSet's survey of analysts.

The investment bank earned $2.8 billion after paying preferred dividends, compared with $978 million a year earlier.

Revenue for the fourth quarter rose to $9.2 billion, 53% higher than a year ago, beating analysts' estimates of $8.0 billion.

The bank's debt-underwriting business profited from a rally in bonds and a surge in demand for debt securities. Goldman's debt-underwriting business earned $2.0 billion in revenue for the year, second-best annual performance and the highest since 2007.

Contributing: The Associated Press

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Source: Copyright USA TODAY 2013