JP Morgan Chase board of directors cut chief executive Jamie Dimon’s annual bonus in half, citing the company’s $6.2bn “London Whale” trading loss, the company said yesterday.
Dimon’s pay was slashed even though JP Morgan, the largest US bank, said fourth-quarter net income jumped 53%, and earnings for 2012 set a record. The fourth-quarter results were helped by increased mortgage lending profits and a decline in the costs for bad loans.
The board said the bank’s strong results were a key reason to give Dimon a bonus, but the London trading losses cut into his compensation.
“As CEO, Mr Dimon bears ultimate responsibility for the failures that led to the losses in the Chief Investment Office,” the bank said in a securities filing.
Dimon’s pay for 2012 was $11.5mn, the company said in the filing, including a salary of $1.5mn and a bonus of $10mn. In 2011 Dimon was paid $23mn, including the same salary and a bonus of $21.5mn. Dimon told reporters call he “respects” the board’s decision.
The trading loss, which was suffered primarily in the second quarter of 2012, has been a major embarrassment for the company.
It is known for the ‘London Whale’ nickname that hedge fund traders gave to JPMorgan trader Bruno Iksil, for the large positions he established from London for the Chief Investment Office. The trade, made with credit derivatives, became too big for the company to exit easily.
The report of the bank’s management task force, released yesterday, primarily assigns blame for the trading losses to the failure of three executives beneath Dimon: Ina Drew, the former chief investment officer; Barry Zubrow, the former risk chief; and Douglas Braunstein, the former chief financial officer.
Fourth-quarter net income rose to $5.69bn, or $1.39 a share, from $3.73bn, or 90¢ a share, a year earlier. Results for both periods included special items.
JP Morgan’s revenue from mortgage production, excluding losses on repurchases of past loans, increased 51% to $1.6bn.
JP Morgan, like Wells Fargo, which is the nation’s largest home lender, has benefited from being a middleman in the US Federal Reserve’s drive to channel inexpensive money to borrowers to support the housing market and the economy. Revenue from making home loans has eased the squeeze on bank profit margins that has come with low interest rates.
The provision for credit losses plunged 70% to $656mn.

BNY Mellon
BNY Mellon said fourth-quarter earnings rose 23%, matching Wall Street estimates, boosted by higher investment management and performance fees at the world’s largest custody bank.
Some analysts were disappointed with BNY Mellon’s trading revenue and expense management.
Nomura analyst Glenn Schorr said strong investment management fees, good deposit growth and solid capital ratios were partially offset by higher expenses, weak trading revenue and flat servicing fees.
Net income was $622mn, or 53¢ a share, up from $505mn, or 42¢ a share, a year earlier.
Investment management and performance fees surged 17% to $853mn on buoyant stock market returns. Assets under management were up 10%. Fees from investment services rose 1% to $1.6bn. Assets under custody and administration climbed 9% to $26.7tn.
Revenue from trading foreign currencies continued to be a weak spot. Foreign exchange revenue totaled $106mn, down 42% on declining volatility and volumes.
The bank is battling several lawsuits, defending itself against allegations of overcharging pension funds and other customers on forex fees, a charge it denies.