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US banks’ post-crisis legal tab tops $100 billion

JPMorgan devoted $21.3 billion to legal fees and litigation since the start of 2008, more than any other lender, and added $8.1 billion to reserves for mortgage buybacks, filings show.

EMMANUEL DUNAND/AFP/Getty Images

JPMorgan devoted $21.3 billion to legal fees and litigation since the start of 2008, more than any other lender, and added $8.1 billion to reserves for mortgage buybacks, filings show.

NEW YORK — The six biggest US banks, led by JPMorgan Chase & Co. and Bank of America, have piled up $103 billion in legal costs since the financial crisis, more than all dividends paid to shareholders in the past five years.

That is the amount allotted to lawyers and litigation, as well as for settling claims about shoddy mortgages and foreclosures, according to data compiled by Bloomberg. The sum tops the banks’ combined profit last year.

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The mounting bills have vexed bankers, who are counting on expense cuts to make up for slow revenue growth and make room for higher payouts. About 40 percent of the legal and litigation outlays arose since January 2012, and banks are warning the tally may surge as regulators, prosecutors, and investors press new claims. The prospect is clouding outlooks for stock prices, and by some estimates the damage could last another decade.

‘‘They’ve crossed the point of no return when it comes to the effects that these expenses are going to have on earnings,’’ said Jeffrey Sica, who helps oversee more than $1 billion as head of Sica Wealth Management LLC in Morristown, N.J. ‘‘This is going to keep on hurting them, and people will start paying more attention.’’

JPMorgan and Bank of America bore about 75 percent of the total costs, according to the figures compiled from company reports. JPMorgan devoted $21.3 billion to legal fees and litigation since the start of 2008, more than any other lender, and added $8.1 billion to reserves for mortgage buybacks, filings show.

Five years after the financial crisis shook global markets, banks are facing accusations that they misled buyers of mortgage-backed securities, rigged interest rates used to price loans worldwide, and manipulated markets for credit derivatives and commodities. Attorney General Eric Holder told The Wall Street Journal this month that he will bring new cases tied to the financial crisis.

Investigators may be stepping up efforts now that the economy has recovered and solvency of the nation’s banks is no longer in doubt, according to Daniel Hurson, a former prosecutor and Securities and Exchange Commission lawyer.

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‘‘There may be a sense that financial institutions have gotten away with a lot, and maybe now is the time to catch up,’’ Hurson said.

The data were compiled from quarterly reports to the Federal Reserve, the SEC, and investors covering the period from January 2008 through June 2013. The reports from Bank of America, JPMorgan, Citigroup Inc., Wells Fargo & Co., Goldman Sachs Group Inc., and Morgan Stanley included Y-9C forms that bank holding companies with more than $500 million of assets must file with the Federal Reserve. The forms disclose specific costs, such as legal fees, that exceed 3 percent of total noninterest expenses.

Some of the banks distinguished between litigation costs and legal fees, which could include routine expenses of running a business, such as drawing up contracts, rather than lawsuits. Still, most outlays at JPMorgan, Bank of America, and Citigroup were tied specifically to litigation, the filings show.

Spokesmen for the six banks declined to comment about their legal costs.

Legal fees and litigation costs accounted for $56 billion of the banks’ $103 billion tally, with $7.2 billion incurred just for the first six months of this year. The rest, $47 billion, was for payments to mortgage investors.

Bank of America, led by Brian Moynihan, 53, increased its legal costs by $3.3 billion in the first half to a total of $19.1 billion. JPMorgan added $1.5 billion in the period. The other four lenders added about $2.4 billion combined in the six months.

Jamie Dimon, 57, JPMorgan’s chief executive, is contending with criminal probes into his New York-based bank’s energy-trading and mortgage-backed securities operations while grappling with investigations into anti-money-laundering safeguards, foreclosures, credit-card collections, and the $6.2 billion ‘‘London Whale’’ trading loss last year.

A US housing regulator is seeking at least $6 billion to settle claims JPMorgan sold bad mortgage bonds to government-backed finance companies Fannie Mae and Freddie Mac, a person briefed on the matter said this week. The bank is fighting the request, the person said.

Penalties in the London Whale episode, named for a British trader whose big bets moved markets, may reach $600 million, The Wall Street Journal reported Tuesday.

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