JPMorgan reports 55% earnings jump at end of '12; Dimon to get pay cut

JPMorgan, the biggest U.S. bank by assets, will pay Jamie Dimon US$11.5 million for 2012, consisting of US$1.5 million in salary and restricted stock awards of US$10 million. That's less than half what he made last year, US$23 million, which made him the highest-paid chief executive of any of the country's mega-banks.

On Monday, the bank was ordered by federal regulators to take steps to correct poor risk management that led to the surprise trading loss last year, which was related to complex bets on fixed-income investments that went wrong. JPMorgan was also cited for lapses in oversight that could allow the bank to be used for money laundering.

The bank's board of directors, explaining its decision to cut Dimon's pay, concluded that the losses were “a serious mistake.” The board also praised Dimon for his response to the problem, which included reorganizing lines of business, shuttering the division that was responsible and getting rid of top managers.

“Importantly, once Mr. Dimon became aware of the seriousness of the issues presented by the CIO, he responded forcefully by directing a thorough review and an extensive program of remediation,” the bank said. The CIO is the Chief Investment Office, the unit where the bets that led to the loss were made.

The bank's board of directors 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. When The Wall Street Journal first reported the losses, bank executives dismissed it, saying it was “based on an inaccurate market perception that the portfolio was unhedged,” or not protected against loss, according to the board.

The trading loss could bring even more regulatory headaches. The bank has said it has received requests for information related to government inquiries and investigations by Congress, the Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the U.K. Financial Services Authority, the state of Massachusetts and others. The bank said it is cooperating with these investigations.

Fourth-quarter earnings shot up 55 percent over the year. The bank made US$5.3 billion after paying preferred dividends, compared with US$3.4 billion this time a year ago.

Per share, those earnings amounted to US$1.40, blowing away the US$1.16 expected by analysts polled by FactSet.

Revenue also beat Wall Street's forecasts, rising 10 percent to US$24.4 billion, after stripping out an accounting charge. Mortgage originations jumped 33 percent.

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