Banking & Finance

Is $13 Billion Finally the Last Major Settlement for JPMorgan?

Jamie Dimon of J.P. Morgan Chase & Co. (NYSE: JPM) may still be a great banking CEO, but he is far from the bulletproof CEO he was considered to be back before his London Whale debacle. Then came more corporate governance problems, and the large government settlements have seems to only beget other agencies and groups to then demand even more in new settlements. So with a record $13 billion settlement with the Department of Justice, we wanted to evaluate whether this is the last big charge coming its way or if it at least marked the zenith of the settlements.

It turns out that this could be the largest settlement it has to make, but there are risks that many more government agency settlements seem to be likely ahead in J.P. Morgan’s future. These mortgage settlements and securitization settlements are simply too widespread and governed in too many jurisdictions to consider this the last settlement.

Tuesday’s settlement requires JPMorgan to pay $9 billion and also to provide $4 billion in consumer relief. That relief will be in mortgage modifications and will include principal reduction.

We still have more pending cases dating all the way back to WaMu and to Bear Stearns from before the recession. If Jamie Dimon set aside about $23 billion to cover settlements and suits in its legal reserves, does this sound like the company can declare the end of the major settlements? News was also out recently that the bank may need even more to fund future settlements.

This settlement being a DOJ record may signal that if a peak has not been hit, at least it may be close. The problem is that these cases could continue to go on for years as the statute of limitations generally applies to case filing dates. At least this DOJ included settlements with some states, particularly California and new York. New York will get more than $600 million in cash and about $400 million available for mortgage relief.

Jamie Dimon signaled that this represents a very significant portion of its mortgage settlements. We would point out that the term “very significant” can still be open-ended on other charges.

There has been a bit of a sell-the-news reaction so far on Wednesday but the stock is still at $56.00 against a 52-week range of $39.88 to $56.93. The consensus analyst price target is now up just above $62.50.