Benjamin Reeves | February 26 2013 12:15 EST
JPMorgan Chase & Co. (NYSE: JPM) has had a bad twelve months, but today might be the end of the losing streak. The financial giant announced Tuesday that it will eliminate 4,000 jobs in an attempt to save $1 billion through cost cutting measures. The job cuts are just the latest setback for the company which faced the massive London Whale trading loss and enormous payouts as part of the National Mortgage Settlement in 2012.
The job cuts were announced Tuesday morning as part of the bank's 2013 Investor Day. JPMorgan isn't being demure about the need to save money, either. The handout provided for the Investor Day headlined the graph detailing the cost cutting as "An important focus area for us." The focus on cost cutting isn't surprising, either, given the recent travails the bank has faced.
JPM just last week completed $7.9 billion in mortgage relief stipulated under the National Mortgage Settlement. The settlement between five major banks and 49 state attorneys general and the federal government stipulated that the banks collectively provide $25 billion in mortgage relief to borrowers.
The settlement came after state and federal investigations found that major mortgage servicers, including JP Morgan Chase, "routinely signed foreclosure related documents outside the presence of a notary public and without really knowing whether the facts they contained were correct," according to the Attorneys General on the Executive Committee in charge of negotiating the settlement. "Both of these practices violate the law."
Of course, the good folks at JPM tried to put a positive spin on the news that they were forced to give up $7.9 billion. "We have helped 87,000 homeowners and continue to proactively reach out of individuals and families who need help," CEO of Mortgage Banking Kevin Watters said Thursday. That the "help" was stipulated by the bank's settlement with the government naturally did not stop JPM from trying to claim credit and moral high ground for it.
Breaking down the $7.9 billion, in nine months last year the bank refinanced $3 billion in mortgages, reduced interest rates 2 percent and forgave $2 billion in principal on first lien mortgages. In September of last year, the company also completed $1.95 billion in settlement relief in California and $1 billion in Florida.
At the same time, JP Morgan was forced to deal with the fallout of the London Whale debacle in May 2012 when trader Bruno Iksil caused as much as $9 billion in losses for the company. To make matters worse, the Wall Street Journal reported last week that the U.S. Senate is considering holding public hearings and testimony about the trading loss.
Long story short, the news that JP Morgan Chase is trimming 4,000 workers for cost savings is not terribly surprising the wake of the past 12 months. In the long run, the cost savings may be good for the compan,y and it seems they have put the worst behind them, but investors on Tuesday were not entirely bullish on the bank's prospects. JP Morgan Chase & Co. (NYSE: JMP) shares dropped just under 1 percent, 45 cents, to $47.25 in midday trading.
Image: JPMorgan Chase CEO Jamie Dimon courtesy Wikimedia Commons.